Salesforce.com Inc. completed its long-awaited initial public offering (IPO) Wednesday, raising US$110 million for the San Francisco company whose outspoken creator is credited with changing the dynamics of the low-end CRM (customer relationship management) market.
Salesforce.com sells "software as a service," encouraging smaller companies to take advantage of its monthly subscription pricing to outfit their employees with sales and customer service systems that were traditionally used only by large organizations able to handle the expense and complexity of such software. Along with rivals such as NetSuite Inc. and Salesnet Inc., Salesforce.com proved such strong customer demand for its software that CRM leader Siebel Systems Inc. had to take notice, creating its own hosted subscription offering last year.
Headed by Marc Benioff, a vocal chief executive with a penchant for splashy marketing, Salesforce.com is also a closely watched company on Wall Street. Many analysts see its IPO as a bellwether of investor demand for shares in new technology companies.
Judging by early results, investors are enthusiastic about Salesforce.com. The company raised its offering range, initially set at $7.50 to $8.50, then priced above that range, at $11. In early afternoon trading Wednesday, shares (CRM) were up 40 percent, trading on the New York Stock Exchange at $15.34.
Salesforce.com plans to use the proceeds from its offering for general corporate purposes. It previously held cash and cash equivalents of $43.7 million, and was just barely operating in the black. For the fiscal year ended Jan. 31, the company posted a profit of $3.5 million on revenue of $96 million -- slightly shy of the $100 million Benioff forecast for the year. In its most recent quarter, Salesforce.com had net income of $437,000 on revenue of $34.8 million.
Benioff is a controversial figure for his unabashed evangelism and competitiveness, traits that have helped Salesforce.com raise both its own profile and that of the still-small hosted CRM market. Last quarter, the company spent $2.1 million on research and development, and $20.4 million on marketing and sales.
Salesforce.com's IPO comes a few months later than originally intended. The company first hit a delay when the U.S. Securities and Exchange Commission asked it to rework some of its accounting, then hit a second obstacle when Benioff granted a wide ranging interview to a New York Times reporter, a potential violation of rules barring company executives from hyping an upcoming IPO. Salesforce.com delayed its offering to allow for a "cooling off" period after the interview.
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