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Wim Dankbaar
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See my entry on Linkedin http://www.linkedin.com/profile/edit?trk=tab_pro Owner jfkmurdersolved.com Broadcast Media industry 2003 – 2011 (8 years) Overveen owner/director Stickerstation Benelux Entertainment industry 2000 – 2003 (3 years) Amstelveen... More
  • Better Check The Facts When Marc Benioff Claims Something  4 comments
    Aug 28, 2012 8:22 AM

    On Cramer's Mad Money show, Benioff was given a free reign again to advertize his company on the quarter's results.


    At the end, at 8:35 min, Benioff stresses a point in defense of his increasing GAAP losses:

    "And let me say one final point on that. You go back and look at Oracle, SAP and Microsoft when they were at our revenue level. They did exactly the same thing that we are doing in. They did not focus on profits, they focused on REVENUE"

    Jim Cramer, who publicly calls Benioff "my friend", then reconfirms Benioff: No, you are absolutely right!

    I was very suspicious when I heard this, as I don't recall Microsoft, SAP or Oracle focusing on revenues, let alone losing money like Salesforce.com is doing.

    You don't have to look hard to verify that Benioff and Cramer are simply lying. For example, google for an article titled:

    "The money made by Microsoft, Apple and Google, 1985 until today"


    As you can see in the graphs below, Microsoft has always been profitable since the start, and profits have been around a solid 25% of revenues. To borrow Benioff's favorite word: AMAZING! Although I doubt he would use it in this case, as he wants "to end Microsoft".



    You will find a similar historical profitability for Oracle and SAP.

    In other words, Benioff is telling untruths to defend the bubble valuation of his company. I don't see any reason to not call this investor fraud. Another addition to the pile of red flags.

    Initially I thought that the average investor in Salesforce.com would realize that the forward PE, as stated on the financial websites, is FALSE.

    However, since I learned that all the analysts, also the critical ones, use this forward PE as a metric for next year's performance, I must conclude that very few investors actually understand the ugly truth. Therefore I cannot emphasize enough that the forward PE is a completely BOGUS and MISLEADING figure, based on Salesforce's deceptive NON GAAP Earnings (projected). The truth is that the PE is always calculated on true GAAP earnings, which are forecasted to be NEGATIVE (losses). In fact more negative than the current year (projected to be a 70 cents per share loss). Therefore there will be no PE in 12 months. It will be as N/A as it is now. In fact more N/A, if that is possible.

    Hence the suggestion of the forward PE, that Salesforce.com will be profitable in 12 months, is totally false and in my opinion nothing less than fraud.

    I believe this is vital to comprehend, for ultimately the value of a company is determined by its (future) capability to generate profits, not revenues. The more revenue Salesforce.com makes, the more money it loses at the bottom line. This fact is masked by stating a forward PE. There is no PE next year. Earnings are forecested more and more negative by the company itself. You cannot have a forward PE with GAAP net losses.

    Does anyone actually understand this?


    Check the real figures on Google Finance:


    Look at the bottom line (literally). And while you're at it, look at the increase of outstanding shares: Diluted Weighted Average Shares.

    This dilution won't end any time soon, as explained by Todd Sullivan:


    When Cramer tells his muppets to buy, savvy investors know it's time to sell. He is used as a contrarian by the smart investors. He was also bullish on other momentum high flyers that have lost their wings and crashed back to earth, like Opentable, Travelzoo and Netflix. And even Bear Stearns two weeks before they crashed 80% . Just google for "Bear Stearns is fine".

    This is like Goldman Sachs a year ago on Netflix:

    GOLDMAN: Netflix Is A Screaming Buy, Price Target $330
    Pascal-Emmanuel Gobry|July 12, 2011

    Goldman has a note out upping its price target on Netflix to $330.

    The big reason?

    Overseas. Netflix recently announced a big expansion to Latin America, and Goldman says Netflix is going to do great there.


    Latin America has 3.5X the number of broadband households as Canada, Netflix's previous international expansion, and growing fast;
    US content is really popular there and Netflix can buy it cheaply;
    There's very little direct competition, mostly pay TV.
    As fast as Netflix has been growing, it's important to remember that the company has a huge market opportunity ahead of it, as overseas shows.

    Here's what Cramer wrote on his blog after the show:

    I read all sorts of lies about Salesforce.com -- that it's not really making any money, that it is just a Ponzi scheme, that its products don't work well, that the acquisitions are papering over weakness.

    In reality, Benioff is just trying to accumulate all of the technology he can in an amazing land grab before everyone else gets it.

    He's doing exactly what Oracle, Microsoft and SAP did in a different era.

    Throughout those trajectories, people sniffed and catcalled and shorted, and it didn't work out.

    The fact that of all of the metrics -- and I count 10 of them -- the only one that was "disappointing" was a guide-down in the next quarter, despite a guide-up in the next year, tells me that the huge after-hours selloff was extreme.

    So, three companies. One that is perfect, Hain, but is now expensive, one that is long-term positive, Sprint, with real profit-taking, and one that is so controversial as to be a total battleground, Salesforce.com.

    If you can stomach a battleground -- hard for me -- Salesforce.com is right, and it was just kept down by endless short-selling last night.

    I have also read that Cramer claims that a stockprice of 200 is likely by the end of this year. I could not find this specific claim, but if it's true, it would mean he adds another 7 billion to the already inflated market cap in just 4 months. That is more than 2 times the projected revenues for this year. Revenues with increasing forecasted net losses. Maybe Cramer could explain how and why he thinks this is logical? Maybe he could also explain why Buddy Media folks just registered to sell their freshly acquired shares? Why are they doing that if Cramer believes the stock has so much upside?

    See page 23 of the SEC filing:



    Up to 1,680,195 shares of common stock are being offered by this prospectus, all of which are being offered for resale for the account of the selling stockholders. Unless otherwise noted below, the shares being offered were issued to the selling stockholders pursuant to an Agreement and Plan of Merger dated June 3, 2012 by and among salesforce, Buddy Media and certain other parties in connection with our acquisition of Buddy Media. The selling stockholders may from time to time offer and sell pursuant to this prospectus any or all of the shares of our common stock being registered.

    The table below sets forth certain information known to us, based upon written representations from the selling stockholders, with respect to the beneficial ownership of our shares of common stock held by the selling stockholders as of August 13, 2012, the date of closing of our acquisition of Buddy Media, except as described in the notes to such table. Because the selling stockholders may sell, transfer or otherwise dispose of all, some or none of the shares of our common stock covered by this prospectus, we cannot determine the number of such shares that will be sold, transferred or otherwise disposed of by the selling stockholders, or the amount or percentage of shares of our common stock that will be held by the selling stockholders upon termination of any particular offering. See "Plan of Distribution." For purposes of the table below, we assume that the selling stockholders will sell all their shares of common stock covered by this prospectus. Certain shares of common stock included in the table below are being held in escrow until August 2013, subject to any claims, to fund any indemnification obligations to salesforce following the consummation of the Buddy Media acquisition.

    In the table below, the percentage of shares beneficially owned is based on 140,427,810 shares of our common stock outstanding at August 13, 2012, determined in accordance with Rule 13d-3 under the Exchange Act. Under such rule, beneficial ownership includes any shares over which the selling stockholder has sole or shared voting power or investment power and also any shares that the selling stockholder has the right to acquire within 60 days of such date through the exercise of any options or other rights. Except as otherwise indicated, we believe that the selling stockholders have sole voting and investment power with respect to all shares of the common stock shown as beneficially owned by them. The beneficial ownership information presented in this table is not necessarily indicative of beneficial ownership for any other purpose.

    Cramer announced he would decide whether Salesforce.com was overvalued after asking Benioff some "tough" questions. It looks like he had already made his mind up before interviewing his CEO friend. I didn't hear any tough questions. What I heard were easy passes for Benioff to kick in the goal, without a referee to cancel those goals for off-side. I can't help wondering if these interviews are rehearsed up front.

    A tough question would have been: When will Salesforce turn its losses around into profits and how are you going to accomplish that, Marc? How are you going to stay ahead of Oracle, SAP and IBM in that process? Please share your vision!

    You know, Cramer is bashing Facebook because of its valuation and high PE (of around 100), yet he marvels Salesforce.com that does not even have a PE! If it will ever become profitable again, that is indeed a very big IF, the PE would start anywhere between 5000 and 10000. I guess Cramer doesn't want you to worry about that moment, because if that moment would ever arrive, it would be in a far distant future.

    Anyway, Cramer has decided the stock is not overvalued. I wonder if Cramer could find me another large cap (undervalued ) stock with revenues under 4 billion, increasing negative EPS and a marketcap above 20 billion? I would be interested in gems like those, but so far I could not find any other than Salesforce.com......

    Disclosure: I am short CRM.

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Comments (4)
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  • Christopher Wallace
    , contributor
    Comments (1325) | Send Message
    Thank you for publishing those FACTS. Forgive the use of caps but the distinction is so important in this case. I have a difficult time trying to decide which is a better short:CRM or AMZN? This tips the scales. CRM now clearly wins that dubious distinction.
    26 Aug 2012, 12:49 PM Reply Like
  • Wim Dankbaar
    , contributor
    Comments (412) | Send Message
    Author’s reply » Christopher, Amazon has a lofty valuation, but they are the Google of the online book/dvd business, with a huge barrier to competition. Moreover, Amazon is profitable. None of that can be said about CRM.


    I would not dare to short Amazon unless you're betting on a overall market meltdown, but you could then short almost any stock. Just my 2 cents.
    26 Aug 2012, 04:24 PM Reply Like
  • djohnsonhot
    , contributor
    Comments (636) | Send Message
    Thanks, Wim...I am now a follower of yours.


    I have always questions forward-looking numbers. I would also add that PROFITABILITY (caps on purpose) is the sole deciding factor fore me.


    You see, I am a wicked step-child of the dot-com melt down when it was common to hear talking heads tout unprofitable firms as good investments.


    Investors get complacent about these numbers, so when I reply to a pal who wonders if they should invest in fledgling companies, I use this example:


    A very close friend of mine, and this is true, was running a supply company (I will not name the type of material but it is in the building trades) asked me for a "bridge loan" in the mid-5 figures. He showed me his balance sheet, cash flow statements, and it all had negatives but he gave me "forward looking statements" that convinced me (wrongly) that he would have positive cash flows in less than 9 months.


    I LOST EVERY PENNY. Therefore, I would submit that none of us investors should even consider a company unless they pass the true smell test: are they showing quarterly and annual profit INCREASES, such as what William J. O'Neill would suggest.
    27 Aug 2012, 12:42 PM Reply Like
  • Timo57
    , contributor
    Comments (78) | Send Message
    Thanks for another revealing article regarding CRM and it's true valuation. And the points re: MSFT and AAPL are well taken. As well as the comment re AMZN-all making money, unlike CRM.
    Your take on Cramer's love affair with CEO is spot on and as a "little guy" Cramer professes to be watching out for, he should mention the short sales he holds in the "non-charitable" account (being flippant vs. accusing him of wrongdoing, for the record).
    Surely the fact that CRM loses money each quarter will eventually add up (or subtract down) in those that truly believe in CRM w/o any hidden agendas or conflicts of interest.
    Are there any investors still long that meet those criteria?
    Appreciate your analysis, and the comments as well.
    I will add that I have a great wide Iron Condor position Sept exp that I'm buying back tomorrow for 60% profit that i placed day of earnings less than a week ago, thanks to CRM's equally overvalued options!


    27 Aug 2012, 07:45 PM Reply Like
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