Salesforce.com IPO Delayed by SEC Query

The long-awaited initial public offering of Salesforce.com will be awaited a bit longer.

The business software company had been expected to launch its $85 million IPO the week of May 24, but has delayed the launch because of concerns raised by the Securities and Exchange Commission, said analyst Kathleen Smith of Renaissance Capital.

A spokeswoman for Salesforce declined to comment, citing SEC "quiet period" regulations.

According to Smith, who has been following the company, the IPO will likely be pushed into June. Smith said the SEC's worry was triggered by a story in Friday's New York Times, which said Salesforce.com founder Marc Benioff and other insiders had disposed of millions of shares in the company since acquiring them in 1999 and 2000.

Benioff refused to comment for the Times story, the paper reported, also citing the quiet period.

The share sales were not listed on the company's prospectus, the article said. Since the sales were made well before the company became public, there is no legal requirement to detail them in a filing.

Smith expects that Salesforce will give the information to investors in an updated perspective. "We think an update will work; I don't see a problem here," she said during an interview.

However, David Menlow, president of IPOfinancial.com, a service that helps price initial public offerings, said the issue could raise a cloud over the IPO. "Investors will say 'If this is true, what else don't we know?'"

Even so, if the actions were merely an oversight, Menlow said, "it won't sour the deal." However, Menlow emphasized that without knowing more about what Benioff and the others did, and when they did it, it's difficult to gauge the effect of Friday's news.

Last month, the company, which sells customer tracking software, said it will sell 10 million shares at between $7.50 and $8.50 a share.

Unlike conventional business software, Salesforce's product runs over the Web, and, most importantly, is very cheap. Salesforce.com delivers software that tracks customer accounts and automates the sales process for $65 to $125 a month per employee, instead of about $2,500 per employee over the life of a contract charged by its competitors.

>To order reprints of this article, click here: Reprints