MGI Analyst Blog
News and unfiltered commentary from analysts at MGI Research.
Article on Salesforce.com in Seeking Alpha Parallels our Concerns but Falls Short
There is a very decent, albeit not foolproof treatment of Salesforce.com (CRM) on SeekingAlpha.com. The article looks at number of relevant accounting red flags but sometimes fails to interpret those correctly or put them into context. Some of commentary following the article highlight the discrepancies.
The article key issues parallel some of the same concerns that we have raised recently in our SaaS Valuation 2012 piece, although our view of deferred revenue is meaningfully different. The author is short CRM shares and we have no position at all.
The issues raised by the article are not new and all this information has been in public domain for a very long time. Short of a real "Short Catalyst" CRM will continue to trade near its historic multiple. While the article raises good points about value creation, the fact is that for SaaS companies like CRM investors now only pay for revenue growth and all other factors are taking a back seat. The fact that Benioff is so focused on growth at all cost is then hardly surprising - his actions reflect investor sentiment. If that sentiment changes, then CRM may have a hard time re-adjusting to the new valuation landscape.
Finally, the job of an analyst is tell the world "What Will Be" as opposed to "What Should Be".
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