Salesforce.com Investors Dump Shares As Benioff Beats Earnings By A Penny Again

The Salesforce.com traveling show is in New York City on Wed. presenting to customers at the Javits Convention Center. But several miles south on Wall St., investors are harder to impress.

The San Francisco, CA -based customer relationship management company beat analyst expectations by a penny for a fourth straight quarter on Wed., reporting non-GAAP earnings of $0.14 per share off revenue of $1.38 billion. Despite the beat, shares of Salesforce were down about 4% in after hours trading from a $61.02 close down to $58.55. That's after the stock had dropped about 2% in trading during market hours.

The company continued to lose money by GAAP accounting, taking a $139 million hit for stock-based compensation. But loss per share was $.06, a marked improvement from the $0.21 per share of a year ago and also less than last quarter's $0.10 per share loss. After a quarter in which Salesforce hit 30% growth across all key metrics, it came close in Q3, with revenue up 29%. Cash, however, decreased 11% from last year to $123 million. That's because a lot of money is still off the books: Salesforce reported $2.22 billion in deferred revenue and $5.4 billion in unbilled deferred revenue that will take even longer to be realized.

Despite the stock dipping in the red on those results, CEO Marc Benioff was his typical exuberant self in a call with Forbes about the results, pointing to the company's massive Dreamforce conference from last month and what he said was a positive feedback for the company's new Salesforce1 Lightning product unveiled at the event. "This was amazing quarter from the perspective of Dreamforce, anyone there saw a huge advancement in cloud and mobile with over 400 companies presenting," Benioff said.

CFO Mark Hawkins credited the earnings estimate beat to the company's deferred revenue growth and claimed the company's margins are "again on track," with the company improving closer to profitability by 125 to 150 basis points. President Keith Block pointed to the company's big-customer deals as an area for optimism, claiming Salesforce signed more seven-figure contracts or larger in the quarter than in any third quarter before, and doubled the number of eight-figure contracts from a year ago. [Update: Block's comment has been amended to reflect the distinction between seven-figure and eight-figure deals.]

Salesforce initiated guidance for full year fiscal 2016 at the high end of its earlier projections at $6.5 billion, what Benioff said was the first cloud computing company to do so. "That squarely puts us in the top five enterprise companies," he says.

Still, investors continue to take jabs at Salesforce in recent weeks. With a market capitalization of almost $38 billion, the company's long carried a value that's high commensurate to its cash flow. High price tags for employee compensation and concern about the company's ability to turn a profit have made some analysts adopt a wait-and-see approach to the company's share value even as they tout Salesforce's innovation in analytics and mobile apps for the enterprise.

Benioff told Forbes that after ten years as a public CEO, he understands that investors want consistent performance and believes that the company's delivering on that while maintaining high growth. "You talk to a lot of enterprise software companies, but you aren't talking to any that are delivering a billion in quarterly revenue that grew 30% and are forecasting $6.5 billion in revenue next year," he said. "It's an extraordinary achievement for our team." And as for the profit concerns? Salesforce's salesman in chief dismissed those fears."We delivered improvement and we will improve on it again next year."

As ever, Salesforce's message is to judge it not by its own numbers, but by the collective strength of its customers. Even after the highs of Dreamforce a month ago, the company still can't ignore that earnings results like this quarter's can be interpreted for good or bad--extraordinary to Benioff, cause for a quick dump-off for day traders.