This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Is Salesforce on the Block?

The potential bidding price of Salesforce is inconsequential to a huge software company like Oracle or Microsoft, Bender said. And Salesforce's earnings before interest, taxes, depreciation and amortization (EBITDA) margin was a stellar 28.9% in November on a trailing 12-months basis, compared to an EBITDA margin of 11.2% for the software industry at large, and 7.5% for SaaS companies, he said.

SaaS companies are slower to arrive at profitability, but yield higher margins than traditional "shrink-wrap" software providers as they mature, Bender said.

Salesforce's margin should make it an attractive buyout candidate. To an acquirer, Salesforce "is going to be accretive and very, very profitable," Bender noted. Software Equity Group does not have a stake in any SaaS company discussed or trade in their securities.

"The behemoths have struggled mightily to penetrate" the market for small and medium enterprises (SME), to little effect, Bender said.

Software as a service is the most viable way to sell to such businesses. Although this market is the "holy grail" to large software developers, small and medium-sized businesses have not responded to them, he added.

Software Equity Group's SaaS index lists 18 companies. These 18 grew revenue at 42.5% in 2007, compared to top-line growth for all public companies of 14.4%, according to Software Equity Group.

If Benioff is looking to sell, now would be the time, as Salesforce's trajectory begins to taper off under the rule of large numbers. The company's revenue grew 83.5% in 2005, 75% in 2006 and likely grew 49% for all of 2007, Bender said.

"That's still phenomenally more successful than the software industry at large," Bender said.

2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
CRM $65.81 0.00%
MSFT $41.62 0.00%
N $93.23 0.00%
ORCL $43.00 0.00%
SAP $71.73 0.00%

Markets

DOW 17,826.30 -279.47 -1.54%
S&P 500 2,081.18 -23.81 -1.13%
NASDAQ 4,931.8150 -75.9760 -1.52%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs