Salesforce.com Leaps Into Cloud Computing

With the launch of Force.com Sites, Marc Benioff aims to revitalize Salesforce.com, and its stock, by adding customer feedback services

By Aaron Ricadela

Salesforce.com Chief Executive Officer Marc Benioff strides into San Francisco brunch spot Ella's, clad in workout clothes, replete with baggy shorts and a baseball cap. It's an unusual look for an executive known for pinstripes and boldly colored ties.

Then again, the different look befits a person who's about to take the company he founded into uncharted territory. Grazing on a salad, the stocky executive says he's stepped up his workout schedule in the run-up to Nov. 3, when Salesforce (CRM) will announce a new Web site-hosting business at its annual user conference in San Francisco. "By the end of my keynote, I want our customers to think about us in a new way," Benioff says.

It wouldn't hurt if investors, too, saw Salesforce in a new light. The company's stock is underperforming a dismal market, leaving some to ask when Benioff might sacrifice some of his go-go sales growth to show more profit—and whether the company, which closed October at 30.96 a share—vs. 70 in August—could soon be acquired by Oracle (ORCL) or by another big fish in the tech industry.

Benioff is adamant that Salesforce is not on the block. "If someone wanted to buy it, where are these people?," he asks. And the company plans to keep hitting the gas on sales growth and market share in hopes of getting even bigger than the $1.07 billion in revenues it's expected to book for the fiscal year that ends in January. "We should be doing everything we can to maximize revenue and market share," he says. "We feel like we're Johnny Appleseed. We've planted a lot of seeds, and we plan to harvest a lot of apples."

Diversification under pressure

They'd better pick fast. Salesforce, which sells software that helps companies measure and manage contact with customers via the Web, is expected to surpass $1 billion in revenue for the first time this year. But Salesforce's stock price has slumped markedly since August, when the company reported billings to customers that fell short of analysts' expectations.

Now, Wall Street is asking if Benioff's vaunted pay-as-you-go model can survive a nasty economic downturn that's forcing customers to lay off workers and spend less on the sales-and-support staff that constitutes Salesforce.com's bread and butter. With "on-demand" software, customers have the option to pay annual or quarterly fees to rent a program, rather than making an up-front payment to own the software indefinitely. If customers curtail or cancel contracts in a downturn, Salesforce may need to diversify more quickly. "Marc Benioff is no dummy and he knows his core business is going to be attacked at the high end from SAP (SAP) and Oracle, and at the low end from Microsoft (MSFT), says Pat Walravens, an analyst at JMP Securities (JMP), who rates Salesforce stock "market outperform." "This is Strategy Planning 101. He can't compete on cost, so he's got to differentiate."