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The 'on-demand' software maker falls 11% on rumors of a major customer defection.
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took a beating Friday, as investors reacted to rumors that the business software company lost a major customer to


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Shares closed off $4.27, or nearly 11%, to $35.10 on unusually heavy volume.

Salesforce, which sells software as an "on-demand" service, has recently been plagued by a

spate of service outages that kept customers from accessing their data for hours at a time. What the company described as a brief outage early Thursday may also have contributed to the sudden selloff.

In an interview with


news service, Karen Haus, an analyst at WR Hambrecht, attributed the stock drop mainly to market speculation that Salesforce lost a large contract to Oracle, but she also said the latest system outage was not helping, either. "I think it is a little bit of both," she said. "Losing the customer is a bigger deal in terms of the stock today."

A spokeswoman for San Francisco-based Salesforce declined to comment on rumors of a major competitive loss.

Salesforce sells software that helps manage customer data; but unlike traditional software suppliers who sell licenses, it hosts the applications on its own servers and charges for a service.

Initially, the company's business centered on smaller companies, but more recently it has won major contracts, including



Merrill Lynch


Citizens Bank

. It wasn't clear if the lost contract referred to a defection of one of those customers, or to the loss of new business to a rival.