Why Salesforce Will Soar in 2014

NEW YORK (TheStreet) -- Salesforce.com (CRM) appears poised for a bright 2014 punctuated by large, enterprise deals and consistent customer retention. A string of strategic moves in 2013 have sowed the seeds for potential success in the coming year.

"I see tremendous runway ahead for ourselves, for our partners, and for our customers," Salesforce's vice president for Strategic Research Peter Coffee (pictured above) tells TheStreet during a recent interview highlighted in the next page.

Indeed, the upward trajectory of Salesforce's stock has the makings of a move higher next year even after having gained more than 25% in 2013. As Schaeffer's Investment Research's senior technical analyst Ryan Detrick explains (chart), after experiencing a breakout in late August, shares have spiked above previous peaks.

"This suggests the shares have a good deal of upward momentum," Detrick said, adding that Salesforce's "firmly" upward trending 200-day moving average indicates bulls are in on the chart. 

Underlying the bullish conviction is evidence of deal momentum. Oppenheimer analyst Brian Schwartz and Koji Ikeda's latest Salesforce customer survey polling 24 enterprises and 26 small to medium businesses at the 2013 annual Dreamforce conference indicates that 60% of the 50 customers sampled are predicting that their company will buy new Salesforce products in the next half year.

Also worth noting is that many of the large companies that looked to be leaning towards buying new Salesforce products also said they would like to expand seats with Salesforce, an indicator of continued customer satisfaction with the possibility of additional licensing revenues.

The poll showed that 71% of enterprise customers were looking to ramp-up their salesforce.com seat count in the next six months versus 67% in 2012. Of all customers surveyed, 72% would like to increase their Salesforce seat count, up from 66% in 2012.

Schwartz and Ikeda's report further revealed that a number of salesforce.com customers who are also customers of Oracle's Eloqua (ORCL) have been experiencing softening satisfaction in the Eloqua Marketing Cloud, creating opportunities for the company as contract renewal windows open.

Salesforce has found itself in the interesting position of being a cloud computing service leader that's also far from saturating the market. In some ways, the company has barely scratched the surface of the cloud computing market. Management recently revealed at the 2013 annual Dreamforce conference that about half of the Global 500 have yet to contract any salesforce.com product and less than 700 customers have been generating more than $1 million in annual recurring revenue for the company. This underscores  further potential in the enterprise space. As Salesforce's investments play out, the company estimates it will deliver its first $5 billion revenue year during fiscal 2015.

Top strategic moves laid down for 2014 during 2013 include visionary acquisitions, product transformations, and top hires. The company most recently bulked up its portfolio with the launch of Salesforce1, a mobile-based platform that combines its core offerings of Sales Cloud, Service Cloud and Marketing Cloud at a time when the mix of workloads running in the cloud is expected to triple over the next five years during this era of mobility, and on-premise workloads could decline more than 20 points. This is according to data based on Piper Jaffray analyst Mark Murphy's survey of 141 chief information officers responsible for more than $111 billion in IT spending budgets.

Meanwhile, Salesforce's summer buyout of Fortune 500 and small business-focused digital marketing software company ExactTarget continues to add to revenue growth. Other accomplishments of the year have included the hiring of software industry veterans such as former Oracle executives Keith Block and Anthony Fernicola to help drive global sales and large, enterprise deals. The company also expanded its upscale market exposure by more than tripling its independent software vendor partners to 900 this year, from the last.

"The extraordinary thing about the way we can engage with a customer even in the early stages is that we don't build a storyboard," Coffee said during the interview. "We don't build a prototype. We build a working application that if they like it, they could begin using immediately."

In next page, Salesforce's Peter Coffee talks strategy, including Salesforce1 and ExactTarget, for the year ahead.

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