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Salesforce spending $690M on HQ, gets naming rights thrown in

  • Starting in April 2017, Salesforce (CRM -1.4%) will spend $560M over 15.5 years to lease 714K sq. feet in a San Francisco office tower that will be the city's tallest building following its completion, and $130M on leasehold improvements.  Net operating expenses related to the lease are expected to total $305M. (8-K)
  • As part of the deal, which covers over half the building's office space and represents a big expansion of Salesforce's existing S.F. HQ, the building will be named Salesforce Tower.
  • Bloomberg estimates Salesforce is paying a steep $83/sq. foot, or more than S.F.'s peak average office rent of $80/sq. foot (set during the Dot.com bubble).
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Comments (10)
  • Doyle3000
    , contributor
    Comments (1385) | Send Message
     
    Pride comes before the fall. the entire SF newspaper is dedicated to this. No one ever even slightly hints at the fact that the company doesn't make any money. It's all about how awesome SFDC is and how many employees they have in the city. Very dangerous.

     

    And I love the Bloomberg observation too. How fitting.

     

    If I had to guess, I would say that by the end of the 15 year lease, it will be renamed the Oracle or SAP Tower because at some point in the next 15 years the world will realize that CRM can never grow into their valuation and the stock will correct down to its appropriate price (say $20) and a giant player who actually makes real GAAP profits will buy them out.

     

    You heard it here first
    11 Apr, 01:30 PM Reply Like
  • ReligiousWacko
    , contributor
    Comments (1202) | Send Message
     
    I'm going to have to disagree with you ...

     

    appropriate price with be closer to $10 :)
    11 Apr, 01:52 PM Reply Like
  • Aroojah
    , contributor
    Comments (2) | Send Message
     
    someone agrees that it will exist until 15 years down the line,in future Oracle or SAP will buy them...

     

    Wake up guys...Its the dangerous company you will know which will swing up..
    I think it will be 500$ worth share around 10 times to e
    what it is now. And my prediction is never wrong...

     

    Mohammed Alam.
    11 Apr, 04:43 PM Reply Like
  • Newport Short
    , contributor
    Comments (10) | Send Message
     
    I agree that Oracle, SAP or maybe even google will buy them in future... But it'll be at pennies on the dollar once they go bankrupt. Please look at their debt structure and stop focusing on artificial and inorganic top line revenue growth that the shareholders never makes it to the bottom line.

     

    Id also advise you compare the revenue growth rate at 34% to cost of revenue growth at 42% and operating expense growth at 37% (all y.o.y)

     

    They may be growing but that growth ain't cheap. I wonder how they'll finance all off this once interest rates get above 0 and banks stop handing out money for free.
    13 Apr, 09:02 PM Reply Like
  • Aroojah
    , contributor
    Comments (2) | Send Message
     
    I will Disagree with anyone.Its a 5 times more the current value stock in 5 years from here.
    It will be easily more than 100$ stock.This stock is political as well as it has tendency to grow.

     

    I give green signal to this stock.
    11 Apr, 04:43 PM Reply Like
  • Newport Short
    , contributor
    Comments (10) | Send Message
     
    Seriously, has anyone even looked at CRM's 10-K

     

    Pretty easy to grow revenue at 30% y.o.y when operating expense and CGS are growing even faster. Anyone find it concerning that a company that does 4 billion dollars in revenue needed a 300M term loan. Or how about the 2.5B in debt they raised last year. Anyone concerned that interest expense on outstanding debt was 33% of 2013 EBITDA? How about the CFO resigning after they raise guidance and the stock is around all time high...... this stock is a joke. The only reason every bank has a buy ratings is they need you retail investors to bid up the price before they convert all of their debt and dilute the price back down to what its really worth... close to nothing.

     

    But hey, maybe Im wrong and the only thing that matters is top live revenue growth
    12 Apr, 04:47 AM Reply Like
  • ReligiousWacko
    , contributor
    Comments (1202) | Send Message
     
    They needed all that debt to finance buyout of Exact Target. In dot com 2.0, it's revenue growth at all costs. GAAP profits are irrelevant.
    I can't wait until bankruptcies start .. it will start with lesser quality names Angieslist but could eventually involve companies with aggressive accounting like CRM
    12 Apr, 10:12 AM Reply Like
  • Newport Short
    , contributor
    Comments (10) | Send Message
     
    Aggressive accounting indeed. Anyone take the time to check the 1.15B in convertibles they keep off the balance sheet thanks to rule 144A.

     

    Bottom line this company has $850M due in 2016 and they only have $747M on hand. Either they're going to turn profitable this year or they're going to have to refinance their debt. And is any bank going to help them refinance before interest rates go up? hell no. No bank is going to continue finanicing these ridiculous deals thru convertibles once rates go up and they have alternative fixed income investments.

     

    Classic roll up story. Operating with extreme leverage (30:1), organic growth stops and now they need to keep borrowing money and acquiring companies to keep the illusion of future profitability going.

     

    Please, anyone who disagrees keep buying, because I have no problem going short until 2016.
    12 Apr, 05:23 PM Reply Like
  • ReligiousWacko
    , contributor
    Comments (1202) | Send Message
     
    So true. I wonder how much time CFO spent worrying about going to jail before he decided to quit.
    13 Apr, 12:09 AM Reply Like
  • Newport Short
    , contributor
    Comments (10) | Send Message
     
    Why do you think he put off retirement for another year, gotta teach the new guy the ins and outs of their accounting games. Considering they can find a new CFO, Anyone with the experience and expertise in accounting to run a multi billion dollar company wouldn't go near this job. Especially now that the stock compensation is looking a lot less sweet.

     

    They can keep growing revenue till the cows come home, The stock price is still getting cut in half within the next 18 months, and this can happen many way
    1) investors finally realize they'll never turn a profit and start to sell
    2) insiders begin selling shares once core revenue growth beings to decline
    3) They default on interest payment(very possible if you look at last years 10K)
    4) Finally they offer more debt in a rising rate environment which increase their cost of debt from a decimal to an actual real number. This will drastically increase WACC and once this is priced in to financial models just sit back at watch the price tumble.

     

    Though I assure you every bank will keep a $70/80 PT on it. After all they're the ones holding the convertible debt and financing this madness.

     

    If anyone owns this stock Id seriously like to know why?
    and do you feel comfortable owning a stock where the main driver of free cash flow growth is an increase in "Expenses related to employee stock plans", and how is that an effect or sustainable measure of FCF growth?
    13 Apr, 09:03 PM Reply Like
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