UPDATE 2-Salesforce profit beats on strong cloud business

Image result for UPDATE 2-Salesforce profit beats on strong cloud business

By Salvador Rodriguez and Laharee Chatterjee

Feb 28 (Reuters) – Salesforce.com Inc posted a quarterly profit that topped Wall Street targets on Wednesday fueled by growth in its cloud-based sales and marketing software.

Shares of the company, which have risen nearly 14 percent this year, were up slightly at $117 in extended trading.

The San Francisco-based company has benefited from the growing trend among companies switching to cloud-based services due to lower costs and high level of scalability.

Revenue from Sales Cloud, its flagship product which allows companies to store data, monitor progress and simplify business processes, rose nearly 16 percent to $931.8 million.

Sales Cloud is the largest contributor to the company’s subscription and support revenue. Salesforce Chief Operating Officer Keith Block told Reuters that growth was “driven by accelerating demand and execution across every industry that we’re in.”

Subscription and support revenue, which accounts for more than half of the total revenue, rose nearly 26 percent to $2.66 billion, beating the average analyst estimate of $2.59 billion, according to Thomson Reuters I/B/E/S.

Salesforce forecast first-quarter adjusted profit of 43 cents to 44 cents per share and revenue of $2.93 billion to $2.94 billion. Analysts on average were expecting a profit of 37 cents per share on revenue of $2.9 billion for the first quarter, according to Thomson Reuters I/B/E/S.

The company’s outlook for the year ahead reflects a bump courtesy of the new U.S. tax laws, Salesforce Chief Financial officer Mark Hawkins told Reuters. “That definitely is a favorable effect with that rate change,” he said.

Salesforce’s deferred revenue, which is used by subscription-based software businesses to measure future business, rose 28 percent year-over-year to $7.09 billion, beating analysts’ average expectations of $6.7 billion, according to financial and data analytics firm FactSet.

The company reported a net income of about $67.6 million, or 9 cents per share, in the fourth quarter ended Jan. 31, compared with a loss of $51.4 million, or 7 cents per share, a year earlier.

Total revenue rose 24.3 percent to $2.85 billion. Analysts on average were expecting a profit of 33 cents per share and revenue of $2.81 billion.

Salesforce holds more than 18 percent of the global customer relationship management software market, followed by Oracle with 9.4 percent, according to 2016 figures provided by research firm IDC.

The company can still grow by taking business from competitors and it is operating in an expanding market, said Joe Tenebruso, analyst with the Motley Fool.

“Salesforce is iterating faster than their competitors, and they’re continuing to take share,” Tenebruso said. “They’re able to integrate the latest tech offerings, such as artificial intelligence, without the need of their customers to purchase new hardware, which is a powerful advantage.”

Excluding items, the company earned 35 cents per share. (Reporting by Salvador Rodriguez in San Francisco and Laharee Chatterjee in Bengaluru; Reporting by Salvador Rodriguez in San Francisco; Editing by Arun Koyyur and Lisa Shumaker)