UPDATE 2-Salesforce.com raises revenue forecast, seeks higher profits

Fri Feb 28, 2014 5:49am IST

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(Adds details from conference call, updates share price)

By Sruthi Ramakrishnan

Feb 27 (Reuters) - Salesforce.com Inc raised its full-year revenue forecast and said it aims to improve its adjusted operating margin, after quarterly revenue grew more than expected on strong sales at ExactTarget, an email marketing firm it acquired in June.

The world's biggest maker of online sales software on Thursday estimated revenue of $5.25 billion to $5.3 billion for the year ending January 2015, compared with its previous forecast of $5.15 billion to $5.2 billion.

Salesforce forecast adjusted earnings of 48-50 cents per share for the full year.

That was largely below analysts' average estimate of 50 cents per share for the full year, according to Thomson Reuters I/B/E/S.

The full-year adjusted profit forecast implies adjusted operating margin growth of 125 to 150 basis points, and assumes no significant mergers and acquisitions by Salesforce for the year ending January 2015.

Adjusted profit for the year ended January was 35 cents per share.

"We are committed to improving non-GAAP profitability by 125 to 150 basis points, which is a huge goal of mine for this year and increasing cash flow growth this," Chief Executive Marc Benioff said on a conference call with analysts. Salesforce aims to keep delivering topline growth at an "outstanding" pace, he added.

Benioff said in November that he would seek to balance "growth and profitability" without jeopardizing his company's "outrageous" pace of revenue expansion.

Benioff, who founded Salesforce in 1999, has for years shrugged off calls from Wall Street to turn a bigger profit by arguing that it was more important to re-invest earnings to increase its market share.

The San Francisco-based company also said its chief financial officer of six years, Graham Smith, would retire in 2015.

Salesforce shares, which had closed at $66.20 on the New York Stock Exchange, dropped 3 percent to $64 after hours but later pared losses to trade at $65.98.

The company's net loss widened to $116.6 million, or 19 cents per share, in the fourth quarter ended Jan. 31, from $20.8 million, or 4 cents per share, a year earlier.

Excluding items, the company earned 7 cents per share, one cent higher than analysts' expectations.

Revenue rose 37 percent to $1.15 billion and beat analysts' expectations of $1.13 billion.

Salesforce's unbilled deferred revenue, a critical measure of contracts that have been closed with business customers but remain off-balance sheet, rose to $4.5 billion, up 29 percent from a year earlier. (Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Savio D'Souza and Richard Chang)

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