Salesforce Powers Up

Shares soar 12% as second-quarter results top expectations.
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Updated from 5:26 PM EDT

Salesforce.com

(CRM) - Get Report

grew revenue by a blistering 64% in the second quarter, but the bottom line turned red as expenses outpaced the sales growth.

Still, the small loss didn't bother investors, as adjusted results topped analysts' expectations.

In after-hours trading, shares were recently up $3.44, or 12.1%, to $31.76.

The company recorded a loss of $145,000, or less than 1 cent a share, compared with last year's profit of $5 million, or 4 cents a share.

Excluding the cost of stock options and other items, Salesforce earned $6.6 million, or 6 cents a share. Analysts polled by Thomson First Call had forecast a 4-cent-a-share profit on this basis.

Total revenue was $118 million, up 64% over last year and above analysts' target of $114.2 million. The company reached an important milestone in the July quarter, pushing the net paying subscriber count past the half million mark to 501,000, a gain of 57,000.

Salesforce continued to make inroads into large corporate accounts, with large wins at

Bear Stearns

(BSC)

,

Hitachi

(HIT)

and

New York Times

(NYT) - Get Report

, among others.

The company's computer systems, which experienced well-publicized outages in December and January, were up more than 99% of the time in the quarter, the company said.

However, the substantial outlay to expand the Salesforce datacenters knocked gross margins (on a non-GAAP basis) down a point sequentially.

Looking to the third quarter, Salesforce projected a profit of 4 cents to 5 cents a share, before items, on sales of $126 million to $128 million. Wall Street was expecting a 5-cent profit on sales of $126 million.

For all of fiscal 2007, Salesforce now expects earnings of 19 cents to 21 cents a share, before items, with revenue of $488 million to $493 million. The guidance is up from its previous target for earnings of 17 cents to 19 cents a share and a top line of $478 million to $493 million.

Including all items, Salesforce expects GAAP results ranging from break-even to a loss of 4 cents a share, compared with its earlier projection for a loss of 5 cents to 8 cents.