賽富時 (CRM) 2008 Q1 法說會逐字稿

At this time I would like to welcome everyone to the Q1 '08 financial results conference call.

(OPERATOR INSTRUCTIONS).

I would now like to turn the call over to Mr.

David Havlek, Vice President of Investor Relations.

Please go ahead sir.

Thanks, Marvin.

Good afternoon, everybody.

I'd like to welcome you to Salesforce.com's first quarter fiscal year 2008 financial results conference call.

Joining me as always today are Chairman and CEO Marc Benioff, and CFO Steve Cakebread.

Before we begin I'd like to emphasize that all of our financial commentary today will once again be in GAAP terms.

Please consider this as we evaluate our results, particularly against First Call consensus estimates, which currently exclude certain recurring items such as stock-based compensation and purchased intangibles.

To eliminate confusion, and given that we report only in GAAP terms, we will be asking the sell side community to submit their primary estimates to Thomson in GAAP terms going forward.

Steve will address this topic in more detail at the end of his remarks today.

Full disclosure of our Q1 financial performance can be found in our Q1 results press release issued earlier today, and also on our Form 8-K filed with the SEC.

Additional financial information beyond what is provided in the press release may also be found on our Web site.

Today's call is being Webcast and a replay will be available shortly following the conclusion of the call through May 25th.

To access the press release, the financial detail, or the Webcast replay, please consult our investor relations Web site, at www.salesforce.com/investor.

The primary purpose of today's call is to provide you with information regarding our first quarter fiscal year 2008 performance.

However, some of our discussion or responses to your questions will contain forward-looking statements.

These statements may include projected financial milestones, anticipated growth goals and results, subscriber, financial and operating metrics, future operating leverage, profitability and cash generation, business strategy, the timing and functionality of future services, product or platform releases and their capabilities, demand for on-demand services generally or the Apex platform or language, the AppExchange directory or other products specifically, market opportunities, expected implementation of our services by certain customers, data center, hardware or software initiatives, future system and service availability, the decline of the enterprise application market, or other business-related topics.

These statements are subject to risks, uncertainties and assumptions.

Should any of these risks or uncertainties materialize, or should our assumptions prove incorrect, actual company results could differ materially from these forward-looking statements.

These risks, uncertainties and assumptions, as well as other information on potential factors that could affect our financial results, are included in our reports filed with the SEC, including our Form 10-K for the fiscal year ended January 31, 2007.

The 10-K is also available on our investor relations Web site.

Also, please be reminded that any unreleased services or features referenced in today's discussion or other public statements are not currently available and may not be delivered on time or at all.

Customers who purchase our services should make the purchase decision based on features that are currently available.

And finally, because the volume of questions in our Q&A following our prepared remarks tends to be quite high, we ask that you limit your questions today to one.

We want to address as many analysts as possible, so we ask that if you have any additional questions, you get back into the queue in respect for other analysts.

Thank you in advance for your cooperation.

With that, let me turn the call over to Marc.

Thanks, David.

I'm glad to have the opportunity today to talk about our incredible start to our fiscal 2008.

In fiscal 2007 we redefined the size and scope of our deployments, and as we begin the new fiscal year, we're seeing large deployments become more common across the globe.

Customers around the world are benefiting from our unique combination of on-demand killer apps, breakthrough on-demand platform, and intensely passionate community.

The results that we are delighted to detail for you today are proof that the marketplace is eager for on-demand solutions, and we believe they will share our enthusiasm for the new ones that are going to be introduced in the months to come.

Revenue for the first quarter topped $162 million, up 55% year-over-year, and roughly 5 million higher than the high-end of the outlook we provided on last quarter's call.

That translates into a nearly $650 million annual revenue run rate and other strong indication of our market momentum.

It took us six years to achieve our first $175 million revenue year in fiscal 2005.

And two years later, our Q1 approached that amount in a single quarter.

And our goal of achieving $1 billion in annual revenue run rate is now clearly in sight -- a milestone we expect to achieve some time next calendar year.

This is something that we have been focused on now, to become the first $1 billion on-demand company.

Our dream is coming to us.

At these levels, we believe we are the fastest-growing software company of our size.

Earnings per share for the quarter was $0.01, at the high-end of the range of our guidance, and operating cash flow was an outstanding $37 million, more than double any other Q1 in our history.

Our ability to generate cash is an inherent strength of our model, and the long-term trend of our cash creation is a key measure of our success.

We ended the quarter with approximately 32,300 customers, a sequential increase of 2500, up 42% from a year ago.

The clear centerpiece of the quarter was our largest deal outside the United States to date, the Japan Post.

The Japan Post is both one of the largest banks and Japan's traditional mail carrier, with over 25,000 locations and 400,000 employees.

Currently a part of the government, it's scheduled to be privatized later this year.

5000 subscribers at Japan Post will use Salesforce applications and Salesforce Platform Edition to help sell financial products to its vast customer base.

We look forward to being an integral part of Japan Post's success as it makes this closely followed transition.

Our relationship with the Japan Post is a unique opportunity to make a strategic customer wildly successful.

It's also a clear signal to the entire Japanese IT market, the second-largest outside of the United States, that Salesforce is the right choice to help corporations manage and share business information on-demand.

Adding to our momentum in Japan was a new win with Canon Marketing and a large add-on with insurance leader Sompo.

In fact, the worldwide wave of success was a major theme for our quarter.

In Europe, global financial leader Zurich Financial Services and [Presinas] Medical Care subscribe to our services and KONE added to their already large implementation.

In Latin America, Sabre Travel came on board as our largest customer south of the border.

Our U.S.

business showed great momentum.

Publishing giant Houghton Mifflin joined as a new customer with over 1000 subscribers, and our leader in the technology sector gained steam with new wins at software giant Computer Associates for 4000 new subscribers and the U.S.

base of Ricoh for more than 2000.

Other major companies joining our customer rolls included Health Net and Flagstar Bank; online travel technology leader Get There.

In online travel, we now have almost every major player, including Sabre, Expedia, Carlton, Get There, and Galileo, who was formerly Siebel's largest on-demand CRM customer, and now ours.

Add-on business was a significant contributor to Q1 as well, with ADP, Ford Motor Credit, Morgan Stanley, Citizens Bank, and Symbol Technologies, now a part of Motorola, all adding to their accounts.

And our strong portfolio of products is inspiring our customers to extend their CRM success to Service and Support and PRM as well.

QUALCOMM, KBC Auto Lease, Relay Health, all added our Service and Support application to their existing implementations, and BusinessObjects and Bell Canada chose us to help manage their partner networks with PRM.

We innovated at a blistering pace in the first quarter, introducing both new products for our teams to start selling now, as well as new applications that will redefine the scope and shape of our company.

And the driving force that's behind it all, the flexibility of our platform and creativity of our dedicated community, the experts clearly agree -- Salesforce Service and Support received the coveted visionary designation from Gartner in their Magic Quadrant report on customer service support, and Forrester's SFA Wave report called our solution a leader.

Here's a rundown of the new products we announced in just the first quarter.

Salesforce Platform Edition is allowing customers to enjoy the benefits of our platform, independent of CRM applications.

We plan to boost our success in financial services with Salesforce Wealth Management Edition, the first of what we expect to be many customized editions of our applications for that industry.

We've built on the strength of our most popular new products by introducing Salesforce PRM 2.0, one of the centerpieces of our spring '07 release.

Salesforce Customer Portal, which will allow our customers to manage and share information with their customers.

Salesforce Content, our new document and content management application, based on our acquisition of Koral.

Finally, we think that Campaign Force, Salesforce's political campaign edition, well end the debate about how political organizations can customize and deploy technology quickly for strategic advantage.

Spring '07 is also a great example of our community-driven innovation model at work.

Our IdeaExchange is our new site where customers can suggest and vote on ideas for new features and products.

The community now can work directly and openly with our product managers to work out the specifics of new features.

To date, the community has almost 6000 registered members who have voted more than 58,000 times on 3300 ideas.

Some of the best ideas for spring '07 were born on the IdeaExchange, such as customized search and time-based workflow.

And as we prepare our next release for this summer, IdeaExchange continues to be a source of inspiration.

This conversation and collaboration with our community assures that all of our new features and products are as relevant and easy-to-use as they are innovative.

And let this be your invitation to see that community in action.

On Monday, this Monday, we will hold a special Salesforce developer conference at the Santa Clara Marriott in Silicon Valley.

We'll make some key announcements about our new platform technologies and, more important, provide in-depth seminars on achieving success with our Salesforce Apex code.

For those of you in the investment community who are looking for the next Salesforce.com, chances are good you'll run into them Monday at one of our workshops.

We're also about to kick off our drive towards the on-demand community event of the year, Dreamforce, so please mark your calendars now for our largest conference ever from September 16th to 19th in San Francisco.

The third pillar of our company, our Salesforce Apex platform, gained momentum on every technology front -- technological sophistication, community momentum, partner success, and third-party validation.

It's clear that in technology these days, there is no hotter story than software service or on-demand, and our platform is leading the industry.

The buzz is clearly building around our Salesforce Apex code, which we plan to release later this year and will review in detail at Monday's conference.

In the first quarter, we had our biggest quarter ever for new developer registrations, and we're now closing in on 40,000 members and the most innovative community of coders in software service.

With Apex, our customers and developers will be able to run their code on our servers.

Our partners are seizing this amazing opportunity that our platform represents.

Our Apex -- our AppExchange incubators sold out in the first quarter, and our initial group of 32 innovative companies is now building the next generation of on-demand success stories in our new San Mateo headquarters.

Many in the news media have wondered whether we performed an exorcism at the former Siebel headquarters building.

But the truth is that nothing banishes the spirit of a dead technology like the spirit of innovation.

And more is on the way, not only in San Mateo, but in new locations around the world.

The community is responding to our innovation of innovation, not infrastructure.

And it's our intention to give the global community of developers the technology platform, expertise and business services that they need to succeed.

I'm also proud that our internal development team has been energized by the opportunity to create any application with Salesforce Apex code.

Our Salesforce (inaudible) project, in which developers build apps on their own time, has already yielded some amazing results.

Our teams created 35 new apps in Q1 that are proving very popular with our customers.

These new apps have been installed over 6000 times in the first quarter and include everything from a case detachifier to mash-ups with Yelp and YouTube.

This level of creativity is an early indicator to us of the flood of innovation we can expect when Salesforce Apex code is widely available later this year.

The AppExchange is where our customers and partners both experience the benefits of our platform, and we're pleased with the continuing strong momentum there.

Customers now test -- have now test driven applications more than 225,000 times and installed more than 26,000 applications.

Keeping with our global theme, AppExchange is a worldwide hit.

More than 10,000 customers in 68 countries have installed at least one application from the AppExchange.

And we're on the verge of posting our 600th application on the AppExchange, just 16 months after it went live.

The DC community is taking notice of this momentum, and they are financing new startups based on this model.

To date, $225 million in venture funding has been raised by AppExchange companies.

In Q1, the community really took notice of all this innovation.

Forbes named AppExchange as one of the top 10 disrupters in 2006, and in the Wired 40 we're ranked number seven on that magazine's ranking of masters in innovation and technology.

And just last month we won another CODiE, our industry's equivalent of the Oscars; this time, best new platform.

Finally, eWeek has ranked us number seven in influence in the IT community on their list of the top 100 innovators.

Pretty incredible for Salesforce.com.

Even our customers are winning awards for their innovation on our platform.

The maker of the world's favorite interactive entertainment, Electronic Arts, was recognized for its use of Salesforce.com's recruiting application at the ERE Excellence Awards.

Electronic Arts prides itself on hiring the best to continue this tradition of leadership, and we're proud they use Salesforce.com's recruiting application to help fuel their success.

We emphasize these awards not only because we're grateful for the third-party validation, but also because we feel they raise a critical point about competition.

We're delivering today, to more customers every day, the robust on-demand applications it takes to make businesses of all sizes succeed.

The large legacy vendors like Microsoft, SAP and Oracle continue to poke around the edges of software service, grudgingly acknowledging the appeal of this powerful new model for delivering innovation and success.

Steve Ballmer said last week that Salesforce.com has a high rhetoric value, and Hasso Plattner said we got it right at the Software 2000 conference a couple days ago.

We are changing the game in the software industry, and no one is better trained, ready, and prepared to succeed than our 2200-plus employees in the new software service market.

Turning now to performance, our world-class data centers continue to run at very impressive levels.

In the first quarter, we served a record 5.4 billion transactions, more than double the level of a year ago.

Just last week we logged our first 90 million transaction day, and our speeds are just over one-quarter of a second each.

Our platform is setting the standard for on-demand integration, with calls to our API accounting for approximately 53% of transactions in the first quarter.

Simply put, we're delivering more transactions to more users at speeds and deeper levels of integration, as evidenced by these API transactions, and our high levels of reliability and availability or on view around the clock at Trust.salesforce.com.

I'm proud that our thousands of employees have been able to deliver these profound levels of customer and partner success and technology innovation, while remaining dedicated to our unique model of integrated corporate philanthropy.

These accomplishments were recognized in the first quarter by the Committee to Encourage Corporate Philanthropy, which presented us with the Excellence Award for 2007.

One of the great missions of our foundation is encouraging the nonprofit community to put our platform and applications to work.

We're proud to say that the United Nations food program has now totally standardized on Salesforce.

It's one of more than 1900 nonprofits who are currently using our service.

And since we donate our services to nearly all these nonprofits, only a few are counted among our roughly 32,300 net paying customers.

In closing, I'm pleased with the momentum that we're showing in existing applications like CRM, Service and Support, and PRM.

I've never been more optimistic about the market potential for these core applications.

Our community continues to prove that every time we give them another chance to connect with us and share ideas, from Successforce to Dreamforce to IdeaExchange, our products get better and our shared mission of success gets stronger.

And our platform is redefining on-demand development and partner success for more ISVs everyday.

Our applications, platform and community form the core of this company, and are poised to deliver unprecedented innovation and, we hope, exciting growth in the quarters to come.

Now I'd like to turn it over to Steve Cakebread for a detailed look at our financials.

Thanks, Marc, and welcome, everyone.

Q1 was a great start to our fiscal '08.

The strong customer success that Marc outlined translated into another outstanding financial quarter.

Our first-quarter revenue performance was 162.4 million, up 55% from the year-ago quarter and up 13% from Q4.

This performance was well above the outlook we provided at the beginning of the quarter, primarily the result of strong early-quarter bookings that materialized into revenue a bit more quickly than we expected.

Geographically, revenue of $124 million in the Americas grew 50% from last year and 12% from Q4.

In Europe, revenues rose even more rapidly at 71% year-on-year and 13% from the prior quarter, to finish the quarter at $26 million.

And as Marc noted, Asia-Pacific had an outstanding quarter, with revenue of roughly $12 million, an increase of 14% from Q4 and 85% from a year ago.

As strong as our international growth has been, revenue growth in the Americas has essentially kept pace.

Our international revenue mix increased 2 points year-over-year to finish the quarter at 23% of total revenues.

With global adoption of on-demand services on the rise, international markets remain a huge opportunity.

And over time, we see no reason why our international mix wouldn't approach the 50% level that is so common among major technology companies today.

The upsized revenue was driven by another strong subscription and support quarter.

Subscription and support revenue of 147.7 million rose 12% sequentially and 57% year-over-year.

This represents 91% of the total company revenue.

And in addition to strong new business bookings, our subscription business continues to benefit from remarkably low attrition.

For the quarter, attrition remained below 1% of net paying subscribers per month, and reflects our continued focus on customer success.

Professional services business, primarily consulting and training, also delivered a strong quarter, with revenues of 14.7 million, an increase of 21% from Q4 and 44% from last year.

Company gross margin performance continues to be remarkably steady.

In fact, if you look at the past eight quarters, our total company GAAP gross margins have consistently stayed in the range of 75% to 77%.

In Q1, GAAP gross margin was in the middle of that range, finishing at 76%.

That's down a bit from Q4 but unchanged from our full fiscal year '07 performance.

With subscription and support revenue at more than 90% of total, it's not surprising that gross margins in that business followed a similar pattern.

Q1 subscription and support gross margins were 86%, down a bit from Q4 but flat from Q1 last year and flat for where they finished our full fiscal '07.

These results reflect the relative pricing power that comes from dedicating to creating greater levels of customer success every day.

And while we've announced a lot of big deals the past few quarters, we're adding customers in the small and medium segments just as fast.

In fact, our mix of revenue has remained virtually unchanged for the past four quarters, with roughly one-third in small-business, one-third in mid-size business, and one-third in large corporations with more than 1 billion in revenue.

And our monthly ASP was up a bit from Q4, and remains well within its historical range of high 60s to low 70s.

Finally, while gross margins in our professional service business continue to be negative, we did get a good bounce-back from Q1 from our seasonally weak Q4.

The ongoing effects of EITF 0021 and continued hiring were the primary drivers of this result.

Operating expenses were well managed during the quarter, finishing at 76% of revenue, down 2% two points from Q4 and 1 point from the year-ago quarter.

While we continue to add people in all key areas to fuel our growth, we're also being more efficient in the use of our resources, and that's showing up as leverage in operating expenses.

In Q1, the expenses as a percentage of revenue for R&D, sales and marketing, and G&A were all flat to down from Q4 levels.

On a year-over-year basis, our 300 basis point improvement in G&A as a percent of sales allowed us to increase our investments in areas essential to growth, namely sales, marketing capacity and product engineering.

Even as we increased those investments, we still managed a full 1 point reduction in operating expenses from a year ago.

There's no question that operating expenses represent the key leverage points in our model.

But with more than 32,000 customers [in an] installed base, and a business model that allows us to grow bigger and deeper into accounts as we create customer success, we could easily lever our model today if we were willing to accept lower growth rates.

However, we believe this would be shortsighted.

We are fundamentally disrupting an industry at a time when market momentum is moving in our direction and the competition is struggling to evolve.

The investments we're making today are essential [for us] to emerge as the dominant on-demand application and platform company of the future, and thus, levering too quickly creates risk in achieving that goal.

That's why we believe that investing in growth while slowly levering the model is the best way to create long-term shareholder value.

To close out my expense discussion, let me quickly give you an update on our headcount.

We finished Q1 with 2243 full-time employees, an increase of 173 from Q4 and an increase of more than 750 from Q1 of last year.

We've done an outstanding job of hiring large numbers of quality people for critical roles, while still delivering the levels of innovation and delivery excellence that customers expect.

GAAP operating margin for the first quarter was 0.3%, our highest level since we began to include FAS 123R stock-based compensation and amortization of purchased intangibles in our GAAP numbers last year.

We achieved these results even while absorbing more than $12 million in stock-based compensation expense, and roughly $1 million of expenses related to the amortization of purchased intangibles.

Excluding the impact of stock-based compensation, operating margin was 7.5% in Q1, and that's up from 6.3% in Q4 and 7.2% a year ago.

These improving results are consistent with my prior remarks about slowly leveraging the model over time even as we're making investments so critical to our industry-leading growth.

Our effective GAAP tax rate for the first quarter was 73%, higher than in Q4 but down from last year's 89%.

As we continue to improve the profitability in some of our foreign tax jurisdictions, we expect this declining trend to continue throughout the year.

GAAP net income for the fourth quarter was approximately $730,000, an increase of more than 1 million from Q1 of last year and an increase of more than 200,000 from Q4.

On a GAAP basis, EPS -- we earned approximately $0.01.

Given the investments we were able to make in people and infrastructure, I was pleased with our Q1 profit performance.

Our strong revenue and growing margins translated into an excellent quarter of cash generation, with operating cash flows of $37 million.

This result was roughly three times the operating cash flow of Q1 last year, and nearly the same as our seasonally strong Q4 result of $38 million.

Capital spending jumped this quarter to $16 million, and several factors contributed to this increase.

First, our acquisition of Koral was accounted for as a technology asset purchase, and not a business combination.

And this added roughly $5 million to CapEx during the quarter.

In addition, our need for additional office space to facilitate growth, together with the opening of our first-ever on-demand business incubator in San Mateo, California, resulted in fixed asset additions of approximately $7 million.

Finally, we had nearly 4 million of capitalized software development for the creation of internal systems and R&D activities related to products that are in beta.

The balance sheet as well remains very strong.

So, starting with our assets, total cash, cash equivalents and marketable securities finished the first quarter at approximately $448 million, an increase of more than $35 million from Q4 and an increase of approximately $150 million year-over-year.

As expected, receivables declined by roughly $24 million during the quarter on our typical seasonal increase in receivables from Q4.

The items that drove our capital spending higher this quarter manifested themselves in the balance sheet in the form of sequentially higher cap software and increased fixed and other assets.

On the liabilities side of the balance sheet, strong bookings during the quarter pushed deferred revenue to record levels in Q1.

Deferred revenue on the balance sheet, which includes booked and invoiced but not yet recognized business, finished at $296 million, an increase of roughly 62% from last year.

That, as you know, is only part of the story.

As in the past, the amount of off-balance sheet booked not yet invoiced business is once again greater than the deferred revenue on the balance sheet.

The only other material change on the balance sheet was a minor re-class of certain income taxes payable due to long-term resulting from adoption of FIN 48 at the start of the quarter.

Together, net total income taxes payable showed a mild seasonal decline.

So, let me turn to our outlook.

For Q2, we're now projecting revenue in the range of 171 to $173 million, and GAAP EPS of approximately breakeven to $0.01.

This GAAP EPS projection is expected to include roughly 13 to $15 million in stock-based compensation, and roughly $1.5 million of amortized purchased intangibles.

This projection assumes an average fully diluted share count for Q2 of 122 million shares, and a projected Q2 GAAP tax rate of about 70%.

For the full year, we're raising our outlook today.

Because of our strong Q1 performance and the continued strong growth in software as a service adoption, we now expect revenue in the range of 722 million to 728 million.

We continue to expect full-year '08 GAAP EPS in the range of $0.07 to $0.09.

This estimate includes an expected 60 to $70 million in stock-based compensation expense and roughly $5 million in amortization of purchased intangibles.

For purposes of calculating these full-year estimates, we project a fully diluted average share count of 124 million shares and a GAAP tax rate of 65%.

Before closing, I'd like to emphasize that we do report our results strictly in GAAP terms, and yet Thomson consensus estimates continue to be in non-GAAP terms.

This has created some confusion with the media and certain analysts.

But in order to avoid any confusion, we ask that the sell side community present their GAAP estimates to Thomson as primary estimates so that those consensus estimates are made on a comparable basis with our reported results.

And we'll be working with Thomson and the sell side in the days ahead to facilitate this change.

We thank them in advance for their cooperation.

So that concludes our prepared remarks for today's call, and next we'll open up things for questions.

Operator, please?

(OPERATOR INSTRUCTIONS).

Laura Lederman, William Blair.

There's been much rhetoric in the quarter about SAP and Oracle and all their new products.

Have any of your customers really asked much about that?

And separately, can you talk about international and Asia, adoption in those markets?

Obviously, they're growing quickly.

But do you feel they're as far along as the U.S.?

What do you need to do to drive even better adoption?

Thanks.

Thank you for that question.

In regards to competition, of course, in the software industry, like in a lot of industries, like the automobile industry or the cellphone industry, you basically have many different types of competitors.

Really the key is that you want to have a differentiated solution against those competitors, and fundamentally you want to change the game away from where those competitors play and into a new game.

And that's what Salesforce.com is all about.

We're all about changing this game in the software industry with basically two things -- a new technology model and a new business model.

And these two new models are very, very different than what Microsoft or Oracle or SAP do, or have done, or even do today.

And when it gets right down to it, no sector of the software industry has more interest from customers than on-demand.

Everybody wants to understand on-demand and go into on-demand.

But really, Salesforce.com and other pure play software service companies are able to bring those customers that vision of the future and innovation, which is why we ranked so high this quarter in some of these surveys you've seen, like the Wired 40 and eWeek's top 100 innovators; people look to us for those answers; people look to us as innovators; people look to us as, basically, the visionaries in on-demand computing.

And the reality is they don't look to those companies for that because they haven't provided that.

They've had rhetoric, or they've put their words there, but they haven't delivered the technology or the solutions.

And just think about it -- who are their top customers?

Who are -- Oracle, SAP and Microsoft -- what are there top large customers in on-demand?

When we say Dell, when we say Cisco, when we say Merrill Lynch, when we say Aon, when we say any of our customer names, or even the one I'm about to get to in answer to your second question -- when we -- the reason we added 2500 customers this quarter is because those other software companies are still selling software.

And that's what they know how to do.

That's what they're incented to do.

That's how their architected.

And yet we have over 2200 employees who only do one thing very, very well, which is sell the on-demand world.

In software, like a lot of industries, it's never a zero-sum game.

And the reality is that -- I look at it personally much like the automobile industry.

You're going to see a lot of different cars on the road and there's going to be a lot of different brands.

But ultimately, you want to get to the position that Toyota is in, the market later, the revenue leader, the technology leader.

And that's how we see Salesforce.

We see ourselves as the market technology leader in this area.

And certainly we're the market share and revenue leader.

And today, with over 30,000 customers and the largest implementations in the world, the most transparency into our systems, and with, frankly, the most innovation -- just look at how many new technologies we were able to bring just in the last quarter -- no one does on-demand better than Salesforce.com.

And when you're buying products, when you're buying from companies, you're going to buy the best.

Because that's what customers want and that's why we continue to do so well.

In regards to your question about Asia, well, I think Asia and Europe are exciting markets for on-demand.

I'm really excited about Japan.

I have been excited about Japan for a long time, as you know.

But with a swing transaction, is what I would call the Japan Post, which we worked on very, very hard, a lot of big competitors in that transaction, because Japan Post is widely regarded by the Japan IT industry -- which is the second-largest IT industry outside of the United States -- as a beacon of where the industry is going, for them to choose us was outstanding.

But it was a huge story in Japan.

The day we got announced, the Nikkei on page one had the deal, that Japan Post had selected Salesforce.com and our on-demand model -- it was page one of the Nikkei.

And I couldn't be more delighted with winning that transaction and how our team is doing there.

And I see other big success stories in Asia and Europe as well.

But for us, the Japan Post is just a tremendous upside opportunity for us.

They have 400,000 employees; we only picked up the first 5000.

And we see just a tremendous, tremendous upside in that one account.

But now, the kind of contacts that we are able to make in the Japan industry, because of the validation of that customer, is unprecedented in our history in Japan.

Thank you for your questions.

Thomas Ernst, Deutsche Bank.

Actually this is Greg Dunham on behalf of Tom.

A quick question.

Obviously, the cash flow from operations was a very strong quarter here.

And the CapEx included some onetime charges due to the acquisition and the space buildout.

How should we think about your cash flow margins going forward in terms of free cash flow?

We, obviously, have always had the management team focused on cash flow.

And I've often said it's pretty lumpy.

This quarter was a good example of that.

We did an acquisition and added 5 million for Koral, as I mentioned.

We put some new buildings in place, and offices, and we're going to continue to grow that.

So, it's tough to forecast what that is.

And we don't give a forecast going forward.

But we are certainly on the move and growing as a company, and you're going to see that lumpiness in our spending and our cash flows going forward.

I guess from the [one stop], do you see any reason why it shouldn't trend drastically differently from what you did in 2007?

As we grow, we've got other opportunities.

We're not giving a cash flow forecast, so we'll leave that to your own devices.

Jason Maynard, Credit Suisse.

As you introduce more and more products, can you talk a little bit about some of the success and maybe some of the challenge you're seeing in selling products like Service and Support, PRM and the platform?

And maybe just quantify what some of those metrics were for Q1.

I think you've given that number in the past.

Thank you.

Our strategy, as you know, is a Trojan horse strategy, which is we come in initially into an account with Salesforce.com, and then once we're in that account, we use that success and the strength of that position to sell additional products.

Those products are many of the ones that you mention, including our Salesforce Service and Support product, or our Partner Relationship Management offering, and even more specifically, our platform, and the ability to build your own on-demand applications as one of our customers.

And that's been a very successful strategy for us.

We believe that it's one of the reasons that our application has been so sticky inside our customers, why the adoption trends have been so positive.

And we see good growth in all of those businesses.

We think those are all very exciting and competitive products.

As I mentioned, the Salesforce Service and Support product specifically got a lot of attention this quarter, as did the Platform Edition.

And I think you'll see some very exciting new products, kind of what we call these blades to our razor, if you will, coming out in the quarters to come.

Kash Rangan, Merrill Lynch.

Marc, I was going to ask a question similar to that of Jason's.

But since you didn't quite give us the detail there, I'm going to ask it a different way, or maybe just focus on Apex.

I was under the impression that Apex was already available.

I think you announced new pricing for Unlimited Edition to $50.

I was under the impression that included Apex.

But it looks like it's going to be available later on in the year.

Can you clarify that comment a little bit, what exactly is available today, and if the customers that have bought the Unlimited Edition effective January 1st get Apex for free?

That's my only question.

Thanks.

It was, you know, at our Dreamforce conference last year we did announce our new Apex technology.

We're the first company in the industry that will let our customers run their code on our servers.

We have a multi-tenant virtual machine that is able to execute this Apex code.

You can embed this code at various levels in the application, at the page level, at the field level, at the application level.

And it's been a very exciting technology.

It's a breakthrough technology.

And customers and developers who have been watching blogs are really entranced and excited about it.

It's currently in what we call a developer preview, which you could consider to be a beta.

That means developers have it as part of our Developer Edition.

There coding in it.

You can see their reviews and comments on our Successforce boards.

If you go to Successforce.com, you will see what people are saying about Apex.

However, we have not yet announced pricing for Apex or packaging for Apex.

We've only announced it as a feature.

And we have not discussed what editions it will be in or what the pricing is.

We've been doing a lot of focus groups and discussions with customers.

And as we get ready to go into a production environment with Apex, we will be able to bring it to you.

But up to this point, Apex is still just in a developer preview mode, and nothing more than that.

So when we get to the next level, we will let you know.

Steve, maybe for you.

When you report the sub number second quarter, are you going to give us Q1 and Q2 separately, or are you going to just go to reporting on a second -- on a half-yearly basis?

As we said before, we'll give you updates periodically about the sub number.

But we are really excited and focused on the products that we've been introducing, the diversity of our customer base in small, medium and large.

And that's how we're driving our business going forward.

So stay tuned.

And I would just add we're also very excited about how not having to report the subscriber number this quarter puts the light on the strength of these aspects of the business which are so important to us, like the revenue and cash flow numbers.

And that's what it's all about at Salesforce, building a strong business based on GAAP standards.

Charlie DiBona, Sanford Bernstein.

Marc, I was wondering if we could turn back to the Apex idea here for a little bit.

As you're rolling this out, can you give us a sense of the kind of timetable you're on in terms of sort of drawing ISVs onto the platform, and having them start to deploy substantial products on it?

And maybe give us an idea of the kind of metrics by which you're going to evaluate your success there, and that we might be able to watch as well from the outside.

What we're doing with our platform initiatives is extremely exciting.

We have, as you know, a comprehensive on-demand platform, including the database, an on-demand database, an on-demand user interface, as well as the on-demand logic environment to build the business logic into the technology, which we call this Apex code.

And all of these things together really make up the ability to build these on-demand applications.

And customers can build these applications or ISVs can build this application, and that's really fantastic.

We're going to make some new announcements around Apex and around this idea at Monday's conference, which is, as I mentioned, going to be our developer conference.

And I would like to invite you to attend that.

I think that a lot of the questions that you have, and questions you don't have yet, but you'll be excited to see answers, will happen at this conference.

We expect to have hundreds of developers attending, and it will be at the Santa Clara Marriott in Silicon Valley.

If you contact David Havlek in our IR, he will make sure that you get in.

And then, as we get ready to roll towards Dreamforce, you're going to see us kind of release the next major edition of our platform.

We've learned a lot about what customers and developers want from the platform.

And our levels of innovation at Salesforce -- I know they're hard to keep up with, just the velocity of them, and even on the platform innovation.

But I have to tell you, I've seen what's going on in our labs, and the stuff that we have come up with in just the last six months is just astonishing.

And I think that when we show our customers what we have in September at Moscone Center, the Dreamforce conference, they'll be really excited about that.

This is important to us, because at Salesforce we consider ourselves to be an applications Company where we have a lot of mainstream applications like SFA and Salesforce Service and Support, as well as Partner Relationship Management, and other key apps that we're building and that we have released, and also Platform Company.

And both of these, both of these pieces are our future.

Heather Bellini, UBS.

I was just wondering -- most of my questions have been answered.

But I was just wondering, Steve, if you could give us an idea of what the impact of foreign exchange was on the deferred revenue balance, on revenue and deferred, from a sequential standpoint and year-over-year.

Year-over-year, it had a little bit of impact in Europe, but not much in Asia.

So it kind of offsets.

It was -- I'll have to get back to you on that, because it wasn't that significant that it moves our number around.

If you look at subscriptions and services, we had a great quarter.

And year-over-year, I don't have that off the top of my head.

So for deferred and for revenues, it wasn't that significant?

On the revenues it wasn't.

On deferreds, I don't think it was either.

Because keep in mind, the deferreds are pretty current in terms of it's all off-balance sheet, or on-balance sheet.

Sasa Zorovic, Goldman Sachs.

My question would be -- when you look at your competitive position -- that was, I believe, one of the first questions that you were asked -- but going a little bit more into that, if you compare your competitive position now versus where it was a year ago and where it might be potentially a year from now, how do you see it having changed or likely to change?

Well, we're in a ride, and that ride is called the technology adoption curve.

And for those of you who have read Geoffrey Moore's book Crossing the Chasm, he really details that as we go from kind of early adopters into the mainstream of the market into laggards.

And this curve -- I've seen companies ride it, whether it was the mainframe companies before, and then it moved to the client/server companies, and they went up that curve.

In the client/server world, they're kind of moving -- they've already moved through early adopters and mainstream, and they're kind of picking up the laggards.

Not too many people are buying mainframe software anymore.

But with on-demand, we're still kind of coming up the early adopter world, and we're just starting to pop into the mainstream world.

That's why you see some -- with us doing mainstream transactions, whether it's Merrill Lynch, or whether it's the Japan Post, or even Cisco, these are large mainstream implementations.

So we're just starting to pop in there, but the vast majority of the market at the top of the bell curve, we're not yet entering yet in on-demand.

We're just starting to come into that world.

So as we head towards that, the key from a competitive standpoint is, of course, you have to have an organization that's focused.

From a distribution and development standpoint, you have to have an organization that's differentiated.

And you have to have an organization that has a history of successful customers.

Because at the end of the day, that's how customers buy today.

They don't listen to analysts, they don't listen to vendors; they talk to each other and then they make their purchasing decisions.

And for us, fortunately, no one has more successful on-demand implementations than Salesforce.com.

And that's by a wide margin.

And of every shape and size, and every geography, and every language, and every industry, we today have the leading implementation.

And that's really where our mind is.

Our mind is, do we have the top implementation in Japan, in the small, medium and large market?

Do we have the top implementation in the United States?

And at this point we're more mature in the U.S., so we'll say, like in the financial services industry, do we have the top implementation in small financial services companies, medium financial services companies and the largest financial services companies in the United States?

And so we have large grids in our company where we're constantly looking at all these different markets.

And do we own and do we have the top on-demand implementations by sector, by size, by geography, by currency, by language -- on and on and on.

And that's very much the game that we've been playing.

It's an incredible ride to watch it happen and go.

And so today, I believe that if you talk to pretty much anyone, Salesforce is the gold standard in on-demand.

And it's because our customers are so successful, and because other vendors, honestly, especially the big vendors, kind of have looked at this market in a halfhearted way.

You look at companies like SAP, only last week Hasso Plattner did a whole presentation, but then when he got right down to it he said we're not yet Google and we're not yet Salesforce.com.

We're just not there.

Those were his public comments.

Even Steve Ballmer said the same thing.

He's like -- yes, they have high -- Salesforce has high rhetoric value, but what you really want is Sharepoint from Microsoft to install your own server.

That's the way to go, and a SQL server and a Windows NT and a Vista on top of it.

He just -- they don't have the product, and they don't have the passion, and the energy, and the innovation, and the insight, and the enlightenment to kind of get them there.

And again, that's recognized not just by the customer, but by Wired magazine, and by eWeek, and by, you know -- even in the philanthropy world we're recognized.

It doesn't matter where you go, we get that recognition.

And they don't like that, of course, because we're affecting their position, and we're also accelerating other companies against them in the world.

Microsoft -- we're accelerating Google against Microsoft, because we show customers that they can use Google apps, like Google spreadsheet and Google word processors instead of buying Microsoft Office.

Microsoft doesn't like that.

So from a competitive position, I would say that the state of our business is that we're strong, and we've got the brand and we've got the customers that make the point.

So I would say we're very, very good today.

Peter Goldmacher, Cowen & Co.

Can you give us a little more detail on the components of CapEx in the quarter, please?

Sure.

It was -- the CapEx spending was about $5 million on the Koral acquisition, because we did that acquisition as an outside purchase.

We had about $7 million in leasehold improvements due to new offices, fairly significantly, obviously, around the incubators and our San Mateo opportunity.

But there's also other offices in the world.

And then, as you know, we have since inception continuously capitalized R&D from beta release to general availability, as well as internal software development that we have going on.

And that was about $4 million.

Can you help me understand why you would account for Koral that way?

What's the --

The business itself was set up such that it had to be that way.

It's just a GAAP accounting issue.

We were buying technology; we weren't buying a company.

Brent Thill, Citigroup.

Marc, you put a considerable investment into the AppExchange over the last year.

Can you give us a sense -- now that you turn to monetize the application exchange, you're asking some of the partners now to share in some of the royalty arrangements, and how those conversations are going, and kind of how you see the next leg of the application exchange in terms of Salesforce's ability to monetize and derive more value to the shareholders.

That's a -- I appreciate the question.

I think it's a very important one.

As you mentioned, AppExchange is a strategic initiative of the Company.

And we're really proud of being one of the first on-demand companies to have a fully integrated application distribution mechanism, fully integrated with our platform.

And today, our AppExchange applications have been installed now by more customers than ever before, and are used by more customers than ever before.

In terms of AppStore partners, we have over 100 companies who have now signed up to be part of the AppStore referral agreement.

And I guess we have about 250 ISVs, and about half of them have signed up for the AppStore.

And we are very optimistic about that initiative.

Of course it's early days.

I'm sure you know we just announced it a few months ago.

And those partners and our sales forces around the world are still aligning to go and close that business.

I expect the first revenue from that to start to show up in the second quarter, and then for it to start to grow over time.

But I have to get back to the one thing that I'm most excited about is a lot of our customers today, and I'm sure you know this because you talk to them, are using the AppExchange, are using the applications from the AppExchange in their business.

It wasn't just some kind of technology that we introduced that wasn't actually implemented by our customers.

More and more we're finding that our customers are installing multiple AppExchange applications to enhance their Salesforce implementation, either ones that we're written, like the ones I mentioned in the script, or ones from ISVs.

And for those ones from ISVs, we're looking forward to participating in their revenue stream.

I think we have the right strategy for that with AppStore.

And as you know, today that's part of kind of the referral program.

And we're working on AppStore Checkout, which is our electronic version, which will come, we believe, towards the end of the fiscal year.

And we're also extremely excited about that as well.

Just keep in mind the revenue streams are pretty immaterial at the moment because we're just getting that ramped up.

So '08 doesn't have much impact.

Nathan Schneiderman, Roth Capital Partners.

I was hoping you could give us -- last quarter you gave us the number of customers with 1000 or more subs, and the number with 500.

I was hoping you could give us that number this quarter, as well as -- DSOs was a very good print; your linearity was good.

I was just curious, do you feel that's because you changed the pricing on the Unlimited versions so you accelerated some purchasing, or was it just the demand was there early?

We had a great set of January's, and then February and March, where the products that we're releasing got a lot of interest.

So that was good.

We also, as you guys know, have a lot of focus on cash.

And collections was one of those areas we hit really hard, because we do have strong January receivables to collect in Q1.

So it's just a combination of good business and good business early in the quarter.

And then on the subs, on the number of customers with 1000 or more, 500 or more?

I don't have that information right now.

(inaudible)

Brendan Barnicle, Pacific Crest Securities.

I was interested in some of the more -- the move into some of the vertical markets.

You had the Wealth Management product that launched this past quarter.

I would love any color you have on that.

And then, any other verticals you look at moving into.

You mentioned some of that, Marc, in your earlier comments.

Is that something you guys will continue to do, or is that primarily going to be in AppExchange, a mix of both?

I'd love any additional color on the vertical strategy.

Thanks.

We're really looking to the AppExchange to help us dictate our vertical strategy.

If you spend time in the AppExchange, you will really see where the action is by vertical.

And we are also looking at building our own products by vertical, as well as aligning our distribution organization by vertical.

Today, of course, our most ambitious effort and our most successful, and we've had the most deepest penetration into all of our competitors' pipelines, is in the financial services market.

We're very excited about our progress in that market.

And we're also very strong in other industries that we've talked about previously on our calls, including high-tech and media, as well as others.

But I think that it's a strategy that you're going to see more of from us and not less, and it's something where we do a lot of work on internally every day.

Peter Kuper, Morgan Stanley.

Steve, I wanted to jump back to the capitalized software discussion, because it jumped up about 100% quarter-over-quarter to 22 million.

So, the 5 million in Koral is in there.

Did the actual R&D costs also jump by roughly another 5 million?

Is that the math there, to get to that 22-ish number?

I think that's up about 4, but keep in mind it's a combination.

We have consistently capitalized R&D from beta to general availability, like I said, as well as we're starting an internal systems renovation.

And you'll see that go in there as well as we start to build those up.

And then also, on this purchase of Koral, there is some tax gross up that goes in there.

There's a couple of things.

It still gets back to just the three fundamentals -- the technology acquisition of Koral; then our investments in software as we're moving forward, both externally and internally.

I get that, but what I'm trying to figure out is how come it could basically -- so we're talking about a 5 million-ish number.

And looking at the 10-K, for all of '07 the balance was 5.6 million for the internal software development centers.

So it basically doubled in three months.

So is there like a lot of (multiple speakers)

Remember, we capitalize from beta to general release.

We had a lot of releases in the last quarter.

And we're doing a number of internal things, like I said.

Okay.

Is this going to be a pattern going forward, do you think, of this capitalized level, or is it something we're going to see flatten out?

Again, it depends on when we go from GA to beta.

So it's hard to predict that stuff, and we don't really talk about CapEx going forward.

You're going to see a huge wave of innovation from us.

We have been building huge -- an awesome technology in our company.

We've of course bought some technology, as you know, like with Koral, where we have our new content management technology.

We're really looking to manage all of our companies, all of our customers' information in our servers.

Content is a major piece of information that we do not manage in our servers today.

Koral was very important to buy.

It was a very immature company.

It was basically a startup with only technology, but very exciting technology, which is why we made the dip into that.

And you're going to see now going forward is we've got a lot of new products and a lot of new features and functions, and of course, more releases coming.

And you're going to see a continued wave of innovation from us as we go forward.

Dan Cummins, Banc of America.

I wanted to ask about the Japan Post deal.

Is that a result of any kind of breakthrough in terms of working with your JV partner, or is that the result of some other partnership in the region?

And I had another question about CapEx.

I'll just say that Japan -- you have to be there for a long time and you have to be patient.

You have to be willing to tolerate a lot of the different changes and things that happen to you in the market.

And Salesforce has done all of those things.

We have a joint venture, as you know, where we aligned with the former president as well as the former chairman of Oracle Japan, Allen Miner, as well as [Jakar Asano].

And that joint venture has been, I think, in operation about seven years; I don't have the exact time.

And we've been able to collect a lot of mainstream customers in Japan, a lot of companies that you probably just generally know about as traditional Japanese companies, whether it's Kikoman Soy Sauce, or whoever it is, manage their information, surprisingly, in Japan, in Japanese, on Salesforce.com, running on servers here in our data centers.

And we've been very successful with those customers.

They have a great experience.

And in Japan, they're used to being second-class citizens to U.S.

software companies.

When I was at Oracle we'd build a product, deliver it in the U.S.; we'd fix the bugs; eventually we'd port it to Japanese; we'd ship it over to Japan; sometimes it would get there about a year later, at the best case maybe six months later.

Japanese customers are always waiting for bug fixes or new versions or things that U.S.

customers already have.

That's not how our product works.

When something gets fixed here in San Francisco, the second it's released to U.S.

customers, it's released all over the world to all customers in all languages.

And really, the folks that have really been the most grateful for that are the Japanese customers, because they have been really hurt the most by U.S.

software development practices.

And we've really benefited from now a strong alliance of customers.

And as you know, it's wide-ranging in size, from some of the smallest Japanese customers to -- I'm sure you know we have Mizuho, to now the Japan Post, which is the penultimate.

And in my last visit there when we announced the Japan Post, it was a whole different game for us when people look at us like a real Japanese company that's fully validated by the top company in Japan.

So it's been an exciting time for Salesforce, because this was one of my personal goals, to be successful in Japan.

Robert Schwartz, Jefferies & Company.

Steve, one for you, and then one for you, Marc.

Steve, it looks like if I look at G&A as a percentage of revenue, you did a great job with it this quarter.

Maybe you could help me understand -- help us understand is it going to continue and what was behind that?

Marc, a couple other companies, really not competitors of yours, but reporting tonight, complained about a tough drop-off in business in April.

And I'm wondering if you saw any change in the buying environment in the last month.

On the G&A side, we're in the four or five cities that we want to be in, and starting to build that out.

We are doing more automation.

Again, we're going to invest where the business is and keep pace with it, but we are trying to look at improved G&A leverage there.

We don't really report our business by bookings.

We don't report our bookings, or our bookings by quarter or by month.

But I'm sure you realize we just raised our annual guidance.

We just had a good -- very good quarter.

So, I guess I will let that speak for how we're doing as a company.

If I can just get one clarification from Steve.

You said that the average sales price was just up a tad.

Where is the components of the increase, some sense of why it was up?

We don't discuss that.

I just wanted to give a signal and an indicator that it's staying well within the range that we've talked to all of you about in the past.

Michael Huang, ThinkEquity.

Can you talk about the percentage of your sales reps that are fully productive on your broadening portfolio of apps and platforms, including PRM and Content?

And along the same lines, can you speak to the type of training programs that you have in place internally to get reps up to speed, and whether or not this is any different than what you've done in the past?

As you know, we don't really talk about the number of reps, and that's partly because we keep adding across the board our resources.

In terms of training and bringing people up to speed, yes, we continue to train our reps.

There's a lot of exciting products.

The good news is our products address the productivity of our sales reps, so they have great incentives to use it.

Our sales reps are assassins.

And in the on-demand market, we have more trained assassins, we think, than any other vendor out there.

It's a very strategic aspect of our business.

And we do a lot to train them and make them productive.

But of course, the weapons we give them they did not have in their previous organizations.

So they require some retraining and tooling and drilling.

But once we get them there, they tend to be very productive and successful.

Trip Chowdhry, Global Equity Research.

Congratulations on very good execution.

Two very quick ones.

At the very macro global scale, it seems like Asia is warming up.

Europe has still not warmed up to the (inaudible) model.

What is the reason for that?

And also, do you have any plans to open a third data center to cater to your global international customers?

Thank you.

We've seen good, solid growth, as the numbers show, in all markets.

And we're soon to have more than a quarter of our business outside of the United States, which is really exciting to us.

And I've mentioned strong, strong and exciting activities in Japan.

And I can also tell you that's true in the rest of Asia.

And finally, in Europe, we have also had good, solid progression of our business.

I think the growth rate in Europe was something on the order of 70%, which is, I think, higher probably than most other software companies that you're following.

Right, Trip?

So we're feeling pretty good about Europe and Asia and the United States of America, which is why we had such a good, strong growth rate for the quarter, which was 55% year-over-year.

Honestly, I'm really excited about being a company that's at more than a $600 million run rate growing more than 50%.

I don't think there's too many other software companies that you're following at that growth rate that are growing their European businesses at 70%.

So we're delighted with those numbers.

Ajay Kasargod, Piper Jaffray.

Philip Rowe, Prudential.

Could you talk a little bit about, as you dip into the mainstream part of the market, clients that are still thinking about on-premise software as an option, what kind of pricing discounts -- what percentage of deals do those represent where there's still need some discount on your side to be competitive with what they think on-premise software costs?

And then secondly, what is your win rate, and how has it changed for that percentage of your deals?

Thank you.

The way we see it at our company is that on-demand is a much lower total cost of ownership for a customer than the traditional on-premise, not only because of the purchase price, but also because we dramatically lower the risk of failure that so many of these customers have experienced by buying on-premise software.

So many of the customers that we have today used to have things like Siebel -- like Merrill Lynch -- my gosh; I think they had $35 million of Siebel software before we extracted it from their enterprise.

And when you're structuring a deal for them, and whether you're putting together a discount or a total package of success for the customer, really ultimately what you're trying to get to is a win-win between you and the customer, making sure they have a rapid implementation, they get adoption, and they get the system that's highly customized and integrated for them.

So I don't think we really see it as peer comparison or in terms of a discount at all; we see it as a full package to make that customer a success, where before they probably have already failed with on-premise software by the time we got there.

Thank you for the question.

Just a quick follow-up, though.

Do you find the percentage of clients that don't understand the benefit as you described it going down?

No.

I think that we're going up the technology adoption curve that I mentioned earlier in the call.

We're moving up that curve with more technology, more features, more function, more success stories, more scalability.

We're able to point to customers today who have signed up for 25,000 users or 15,000 users.

A year ago we were not at that level.

So that just brings more customers and more prospects and more excitement and more energy to us.

And there's nothing like that.

That's where you want to be.

And that's why Hasso Plattner and Steve Ballmer and Larry Ellison are all having to respond to us, because we're doing so well.

And we're -- we have fully penetrated all of their pipelines.

If they're in a deal, and it's a CRM deal, odds are we're in there.

There seem to be no further questions.

Do you have any closing remarks?

Yes.

Before we close off today, this is David from Investor Relations.

I just want to make everybody aware of a couple of upcoming events at which Salesforce.com executives will be appearing in the next week.

First, tomorrow morning at 11 AM Pacific Standard Time, Marc will be providing the closing keynote at the Deutsche Bank Technology Conference here in San Francisco.

I encourage you all to either attend that event or listen in, and we will have a Webcast on our Web site.

Then, as Marc mentioned in his comments today, Salesforce will be hosting its Second Annual Developer Conference on Monday the 21st in Santa Clara, California.

Again, Marc will be keynoting that event and there will be a panel luncheon as well for analysts and media.

If you would like to attend that event, please do contact me directly, and I will make sure you get registered.

With that I'd like to thank you very much for joining us today.

Have a great day, and we'll look forward to catching up with you next quarter.

Thank you.

This concludes today's conference call.

You may now disconnect.