Ian Gilyeat

Salesforce.com Unlikely to Sustain Its Current High Multiple

Agree - don't know that anyone can justify a 100+ multiple in today's market. In any market for that matter.

Salesforce.com: Recession-Resistant, or Just Late to the Pain?

Late to the pain is my assessment. One of the key indicators as to the health of a subscription publishing operation is the balance sheet and how this is effected by cash flow needs (i.e. short-term sales & markeing needs for customer acquisition). In the case of Salesforce the liability that they carry to their customers is based on annual licenses that are paid in advance of the software delivered as a service. I believe this is shown on the balance sheet as Customer Advances. Marketing expense impacts current cash needs and pulls from the proverbial bank account. The ratio of cash in the bank and the liability that the company owes to its customers is a key indicator.

An an annual basis they look great but quarter over quarter, the Customer Advances have flat lined and the cash on the balance sheet took a dip in the last quarter. Based on this, the growth engine of this company, with nearly 50,000 subscribers is no longer in growth mode and it appears that they are drawing down the cash that their customers have given to them to deliver future services over the next twelve months.

Unless the next few quarters bring tremendous new customers into the company, my guess, is that the pain is on the horizon.

What Might Omniture Buy Next?

Great hypothesis. Where does a company like Omniture go to continue growth when they've exhausted their niche market? Marketing automation would be a good extension for them. I like the thought and it keeps them selling to many of the same core people - marketing professionals.

NetSuite Aims to Connect to Salesforce.com's Cloud

In general, I think this is a great development. The two SaaS offerings can be complimentary. To the point of complexity, it is already here. As for Salesforce and the AppExchange, rapid deployment of new functionality is a reality - or it least it can be when the implentation is immature. However, as more and more apps are added into the Salesforce system and as customizations evolve over time, the system becomes increasingly complex. This is not unique to on-premise systems but also occurs in SaaS solutions. Customization usually begets complexity.

Salesforce.com Needs Focus On Margins, Acquisitions

The thin margin is easy to understand given their focus on growth. Their spending continues to outpace the amount of cash they are putting on the balance sheet. Deferred revenue is up 24% whereas revenue and headcount growth continue in the 35% ranges.

Also, if they're going to acquire, I would expect it to happen in the professional services arena. They are now breaking out professional services revenues for investors. This indicates a long-term committment to growing this revenue segment. Companies like Astadia are attractive targets to help balance the revenue mix and boost professional services.

TeleTech Holdings, Inc. Business Update Call Transcript

It's great to see the detail of the call. Reading between the lines, as is always the case in outsourcing, while some companies perform well others take it in the shorts. This is one of the core challenges of the BPO space - and the opportunity; growth and decline of companies occur within the same industry during the same economic events (downturn), at the same company (TTEC). Example only for illustration - Sprint could be doing great while AT&T could be in decline - both with the same service provider. The real task is to manage the total business, even while there is tremendous churn inside of the BPO company. Over the last ten quarters - TTEC has done this well. Droping the top line growth from 10%+ to 6-8% is a clear admission that their ability to bring new clients onboard is not keeping up with the softness they are experiencing in their embedded base customers. As they move to higher margin offerings (Tier 2 & Tier 3 tech support) this will continue to be a challenge.