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Is Marc Benioff the next Larry Ellison?

|Includes: Salesforce.com, Inc. (CRM)
Marc Benioff was on Bloomberg on 8/30/11 talking to Emily Chang. He compared his focus on the top line of Salesforce to the way that Oracle was run in 1994 when he worked there as a Vice President.  In short he compared his business to Oracle's and his leadership to Ellison's.  But is that a valid comparison?

This is what Oracle's profit margin looked like leading up to 1994 and one year after:

1992 - 5.3%
1993 - 6.5%
1994 - 14.2%
1995 - 14.9%

And here is what the profit margin looks like for Salesforce.com leading up to 2011:

2007 - 2.5%
2008 - 4.0%
2009 - 6.2%
2010 - 3.9%

Personally I don't like companies that have to "buy" customers by operating on very small profit margins. Salesforce is running on a profit margin that would be more appropriate for a supermarket than a high tech company with in-demand services. Marc has the instincts of a salesman and he can certainly build excitement. But I'd steer clear of CRM until they show they can ratchet up profit margins--and soon. The top line can't make up for the fact that their competitors have, in some cases, 7-8 times the profit margin of Saleforce.com. In that environement capital will eventually flow away from the low margin business to the higher margin one.

By the way, Oracle's most recent profit margin was 30%.  This compared to Salesforce's most recent profit margin of -1%.  Yes, that is minus 1%.


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.