Salesforce.com

(CRM) - Get Report

leapt out of the gate this summer amid expectations that the upstart software provider would be one of the hottest tech IPOs of the year.

Nearly six months later, the company is still growing fast, but with tens of millions of shares leaving lockup in a few weeks -- and short-sellers controlling more than half the float -- investors could have a very bumpy ride.

To be sure, there's a window of time in which any bit of good news has the potential to give the stock a boost. If Salesforce moves up, shorts will scramble to cover their positions, and the resulting squeeze will goose the stock even more.

"I can see the stock spiking to $20, and I'll get out in a hurry," said one trader who recently took a long position in the stock, which closed Wednesday at $18.

But the window will shut hard on Dec. 19 -- the end of the stock's 180-day lockup period.

The next day, as many as 89 million shares, most held by insiders, will be eligible to trade, according to the company's registration statement. Although various restrictions make it impossible for all eligible shares to be sold at once, some analysts think that perhaps half that number will hit the market. And that, say analysts, could trigger a wave of selling.

"Salesforce.com investors have waited a long time for a liquidity event and many are likely to take this opportunity to lock in their gains," said JMP Securities analyst Patrick Walravens. "We do not think it is a coincidence that the US Venture Partners representative

Magdalena Yesil on the board resigned a month before the lock-up agreements expire," he wrote in a note to clients. Leaving the board frees Yesil to sell her shares, he said. As of her most recent

Securities and Exchange Commission

filing, Yesil owned 422,000 common shares and held 1.6 million shares of Series B convertible stock.

Although Salesforce has 103 million shares outstanding, the float is just 10 million shares, and 52% of those shares have been borrowed by short-sellers. There's so little stock available that it would take short-sellers 15 days to cover their positions, well above the 10-day threshold that traders consider worrisome, a classic setup for a short squeeze, and a sign that the stock could become very volatile.

Salesforce has been the proverbial roller-coaster ride for investors since it made its much-anticipated debut as a public company on June 23. Even its ticker symbol -- CRM -- showed some panache, standing for the company's product, customer relationship management software. The stock opened at $15, and closed that day up $17% to $17.20.

But the glow faded quickly. Within a month, the company was warning that profit and revenue for the full year would be lower than expected.

By mid-August, helped by a downturn in tech stocks in general, Salesforce hit a 52-week low of $9. The stock recovered smartly, trading as high as $22.70 in early November, only to head south after the company issued disappointing guidance this month for fiscal 2006.

Analysts were expecting earnings of 15 cents a share on sales of $278.5 million, but the company projected less -- EPS of 10 cents to 12 cents on sales ranging from $275 million to $285 million.

For those bulls hoping to profit from a short squeeze, the disappointing earnings call was bad news.

"What's the good news that's going to bump the stock?" Donovan Gow of American Technology Research asked rhetorically. "I don't see it, so you have to say the end of the lockup is going to be a significant negative." (ATR does not have an investment banking business.)

The bull case rests on three legs: the company's strong top-line performance, the stock's recent decline in value, and Wall Street's appetite for "hosted" software that runs over the Internet, said Peter Coleman, who follows the stock for ThinkEquity Partners.

Despite the disappointing guidance, Salesforce grew revenue by 82% in the recent third quarter and increased its subscription base by 81%.

Shortly after the report, analyst Denise Rush of Roth said the stock was "oversold," and upgraded Salesforce to a strong buy. She said the company's recurring subscription revenue has grown more than 30 times in roughly four years. "We view this as singularly impressive performance for a company ofCRM's scale," Rush said in a note to clients.

Unlike conventional business software, Salesforce's product runs over the Web and, most importantly, is very cheap. It delivers software that tracks customer accounts and automates the sales process and charges on a pay-as-you-go basis. Conventional CRM providers generally sell expensive term licenses.

Siebel Systems

(SEBL)

, the largest CRM vendor, responded to Salesforce by starting a similar service called "On Demand," but has not yet released sales figures.

"There hasn't been a lot of growth in

conventional software this year. People are looking at On Demand as a good vehicle to own and there aren't many stocks out there to buy," said Coleman. (ThinkEquity does not have an investment banking relationship with Salesforce.)

Indeed, another newly public company specializing in on-demand software,

RightNow Technologies

(RNOW)

, has had a very strong year -- appreciating $189% to $20.29 since debuting at $7 in August.

Investors may be hungry for on-demand software. But whether that appetite will survive the glut of Salesforce shares poised to hit the market is far from certain.