NEW YORK (TheStreet) -- With better-than-expected results coming out from Cisco (CSCO) and Rackspace (RAX), it seems corporate executives are feeling much better about the state of their businesses. They've developed enough confidence to spend more money.
Although Salesforce.com (CRM) has come under scrutiny for investing in growth rather than focusing on profits, management deserves credit for having placed the right bets on customer relationship management business, or CRM (for which their stock is named).
The stock, on the other hand, has been tough to gauge, particularly for value investors. Still, it's tough to bet against the cloud and enterprise giant, which will report first-quarter earnings results Tuesday.
The Street will be looking for earnings of 10 cents per share, which will be flat year over year. The company is expected to post full-year earnings per share of 50 cents, up 42% year over year. Analysts are unsure of what to expect, however, given management's questionable track record on expenses.
In the most recent quarter, operating results were impacted by higher costs. And this goes back to the reputation Salesforce has established as a "grow at all cost" operator.
But here's the thing: Salesforce has always delivered the growth that the Street has come to expect.
For instance, despite the wider-than-expected fourth-quarter loss, the company demolished its revenue targets. This time, revenue is expected to be $1.21 billion for the quarter, 36% higher than the year-earlier total of $892.6 million. For the year, revenue is projected to come in at $5.29 billion.
The optimism about Cisco's results, which beat both top and bottom lines, suggest that business conditions in the U.S. and across the globe are improving. To that end, I expect Salesforce, which is the cloud leader in customer relationship platforms, to secure the type of deals that were not possible at the beginning of the year.
Salesforce's ability to differentiate from, say, IBM (IBM) and Workday (WDAY), gives it the sort of advantage that customers appreciate -- especially those looking for capabilities in digital cloud marketing. And when you factor in that Salesforce has posted revenue growth in the last two quarters, including a 28% year-over-year jump in the January quarter, it becomes a question of "by how much will it beat," not "will it beat?"
With its expertise in cloud management of various business functions like sales, marketing and big data analysis, Salesforce figured out how to service these needs at a fraction of the cost. The company's subscription platform has become the new standard, replacing the traditional contracts and bundled licenses from the likes of IBM and SAP (SAP). And Salesforce's growth, according to research firm Gartner, has only just begun.