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August 17, 2005

Enterprise deals buoy

Large enterprise deals drove record sales, profit and subscriber count at Inc during its most recent quarter, the company said yesterday.

By CBR Staff Writer

The Web-based customer relationship management software company also announced its new data center architecture called Mirrorforce, designed to make its applications more secure and help its push into the enterprise space.

Quarterly revenue at grew an impressive 77% to $71.9m, while profit more than tripled to $5m, or 4 cents a share, versus 1 cent last year.

But the number chief executive Marc Benioff talked about most during a conference call yesterday 41,000 – the number of paying subscribers it added during the quarter, which boosted subscriber count to 308,000, or 83% more than a year ago.

Yet, Wall Street investors had hoped for even more. Shares in yesterday dropped about 11% in after-hours trading to $19.74, after closing at $22.20.

The expectations heading into tonight’s results were pretty high, so I think most investors when they saw the 41,000 subscriber number were potentially disappointed, said Jason Kraft analyst at brokerage house Susquehanna Financial Group. Whisper numbers our there were in the mid-40s to high-40s for subscriber numbers.

Kraft, whose employer does not have an investment banking relationship with and does not make a market in its shares, had estimated 40,000 additional subscribers.

Still, Benioff took the opportunity to jab at chief rival Siebel Systems Inc by saying his company gained more new subscribers during the past quarter than Siebel’s entire on-demand CRM effort.

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Among’s new customers is current Siebel customer Wall Street banker Merrill Lynch & Co Inc, which signed up for 5,000 subscribers, Benioff said.

However, a Siebel spokesperson said Merrill Lynch had just a trial deployment with of fewer than 5,000 users among its broker staff of 25,000. Merrill has signed up for the right to deploy up to 5,000 seats but is under no obligation to do so. Siebel and are still competing for the overall business of Merrill Lynch, said the spokesperson.

Benioff also said the company had good growth in Europe and Asia, and named Nortel as a major enterprise customer with a substantial European rollout, as well as Hitachi Software Engineering Co in Japan.’s bread-and-butter business, however, remains SMEs, Benioff said. We added over 1,400 customers in the quarter … a vast majority of those are small and medium businesses, Benioff said.

Benioff also confirmed plans to expand into Europe and Asia, but expects to have smaller data centers overseas than in the US, where the majority of its subscribers are based.

During the recent quarter, the company also added 83 employees, bringing total headcount to 1,059 versus 876 last year. The company increased its professional services staff by 30%. Chief financial officer Steve Cakebread said the company does not expect to add as many people during the current quarter.

On the technology front, Benioff said would spend $50m on a new data center architecture it calls Mirrorforce. The technology would mirror and replicate customers’ information between a new east Coast data center and its west coast center, so that if one data center becomes inoperable, applications would continue to operate.

Benioff said he expects Mirrorforce to be live as part of its upcoming Winter ’06 release by years’ end.

Looking ahead, the San Francisco, California-based company raised its fiscal 2006 guidance slightly to about $78m to $80m in revenue and earnings per share in the 2-cent to 4-cent range.

Subscription and support revenue spiked 82% to account for $65.6m in sales for its quarter ended July 31. Professional services and other revenue grew 38% to $6.3m.

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