賽富時 (CRM) 2013 Q4 法說會逐字稿

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  • Operator

  • Good afternoon.

  • My name is Kim, and I will be your conference operator today.

  • At this time, I would like to welcome everyone to the salesforce.com fiscal fourth-quarter and full-year 2013 results conference call.

  • (Operator Instructions).

  • Thank you.

  • I would now like to turn the call over to John Cummings, Director of Investor Relations.

  • John Cummings - IR

  • Thanks, Kim, and good afternoon, everyone, and thank you for joining us today to discuss our fiscal fourth-quarter and full-year 2013 results.

  • Access to our fourth-quarter and full-year results press release, historical results, our SEC filings, and a webcast replay of today's call can be found on our investor relations website at www.salesforce.com/investor.

  • We will also be posting the highlights of our call on Twitter at the handle @salesforce_IR.

  • Joining me on the call today are Marc Benioff, Chief Executive Officer, and Graham Smith, Chief Financial Officer.

  • Marc and Graham will share a few prepared remarks about the quarter and year, and then we'll open the call to your questions.

  • Please note that our commentary today will primarily be in non-GAAP terms.

  • Reconciliations between GAAP and non-GAAP metrics for both reported results and our forward guidance can be found in our earnings press release issued about an hour ago.

  • In addition, we may offer incremental metrics to provide greater insight into the dynamics of our business or our fourth-quarter or full-year results.

  • Please be advised that the additional detail may be one time in nature and may or may not be provided in the future.

  • It is also possible we may reference (multiple speakers) services or features not yet available in our discussion today.

  • Because we cannot guarantee the future timing or availability of the services or features, we recommend customers listening today make their purchase decisions based on services and features that are currently available.

  • The primary purpose of today's call is to provide you with information regarding our fiscal fourth-quarter and full-year 2013 performance.

  • Some of our discussion and responses to your questions may contain forward-looking statements, which are subject to risks, uncertainties, and assumptions.

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

  • All these risks, uncertainties, and assumptions, as well as other information on potential risk factors that could affect our financial results, are included in our forms filed with the SEC, including our most recent report on Form 10-Q, particularly under the heading risk factors.

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

  • Marc?

  • Marc Benioff - Chairman, CEO

  • Hey, thanks so much, John.

  • I really appreciate it.

  • Hey, before we get started, I'd like to share some very exciting news.

  • I'm thrilled to announce that just this morning, salesforce.com was named by Fortune magazine as the world's number one most admired software company.

  • And I'd just like to congratulate our entire team at salesforce.com for this amazing achievement.

  • And also this morning, we posted on the Apple AppStore our exciting new version of Salesforce Chatter, our world-class award-winning social enterprise network app, and it has some incredible new capabilities for all of our customers.

  • So check that out.

  • I'd like to congratulate the team for their amazing performance in the fourth quarter.

  • We had a spectacular finish to yet another year of exceptional growth.

  • Revenue for the fourth quarter rose 32% from a year ago to $835 million, and for the full year, we delivered more than $3 billion in revenue.

  • That's an increase of 35% from fiscal year-2012.

  • In constant currency, our full-year revenue grew an even faster 37% for the year.

  • That's pretty awesome.

  • I just want to congratulate salesforce.com.

  • Constant-currency growth for the full year at 37% and the first enterprise Cloud company over $3 billion in revenue.

  • No other top 10 enterprise software company is growing faster, and just an awesome job by everyone in the Company.

  • Thank you for all your hard work.

  • Operating cash flow rose to more than $280 million for the quarter, an increase of 17% year over year.

  • For the full year, we delivered more than $730 million in cash.

  • Operating cash, up 25% from last year, and deferred revenue grew by 35% year over year to roughly $1.9 billion, and more than $5.3 billion of booked business on and off the balance sheet, up 50% from last year, also incredible.

  • During the quarter, we closed more seven- and eight-figure transactions than in the fourth quarter of last year.

  • In all, we signed more than 150 multimillion-dollar transactions; that is, we signed more than 150 transactions in the quarter that were more -- that were seven figures or more, and that included nine eight-figure transactions in the quarter.

  • Pretty epic.

  • Given our customer momentum and strong pipeline of new business, I am absolute delighted to announce that we are raising again our full fiscal 2014 revenue guidance, which we now project at $3.82 billion to $3.87 billion, and this puts us on pace to reach a $4 billion annual revenue run rate.

  • During this fiscal year, we absolutely have that $4 billion revenue run rate in sight, so I'm very excited about that, and definitely our short-term goal on the way to our $10 billion dream.

  • Salesforce.com has always been a catalyst and evangelist for change in enterprise software.

  • We pioneered the shift to the Cloud, we pioneered the shift to social, and we've pioneered the shift to mobile.

  • And today, with this next generation of technology, our customers are connecting with their customers in entirely new ways.

  • They are becoming customer companies.

  • Now more than ever, companies are looking to salesforce.com as their platform for innovation.

  • We're seeing incredible demand from companies that want to leverage today's incredible new shifts in technology.

  • And with our four product lines, sales Cloud and service Cloud, marketing Cloud, and our salesforce.com platform, our customers have the tools and are absolutely becoming these customer companies and unlocking greater levels of growth, innovation, and success.

  • Now that's why our customers have made salesforce.com number one in each of our core four markets, and these four core markets are absolutely where we have our focus today.

  • Of course, our flagship Sales Cloud continues to be the number one app in the world for sales.

  • We're number one in Cloud CRM.

  • Gartner predicts we'll displace SAP this year to be the number one CRM market-share leader in all of CRM, including on premise, and that's very exciting for us because, of course, SAP has been the CRM leader, according to Gartner, for the last decade, and we are absolutely delighted to replace SAP as the number one CRM company in the world.

  • And this is just the beginning.

  • With more than two-thirds of the CRM market still being delivered on premise, we've got absolutely plenty of room to grow.

  • The Service Cloud is the world's number one app for customer service and support.

  • Our Service Cloud product line is delivering outstanding growth in the quarter, well positioned to be our next billion-dollar product line, and we are recognized in Gartner's Magic Quadrant for service and support, as well is the leader in Forrester, and Gartner predicts more than 75% of customer service systems will be replaced or upgraded by 2016.

  • Well, that's a pretty phenomenal opportunity and that's why we have doubled down with the Service Cloud through the introduction of Desk.com.

  • And with Desk.com, we have now a Service Cloud for the small business, as well as our traditional enterprise Service Cloud as well.

  • The Marketing Cloud is the world's number one app for social marketing and the only social solution that is seamlessly connecting marketing with sales and service, and as the lines between marketing and sales and service blur, we're seeing that CMO become a strategic and critical part of how every company operates.

  • It's on everyone's mind that Gartner said that by 2017, Chief Marketing Officers are going to spend more than Chief Information Officers on technology.

  • And just this last week in New York, when I was meeting with some of our largest customers, in tow with them are their Chief Marketing Officers for the first time, and this vision is turning into an incredible reality.

  • We definitely saw that when we had an incredible story this week with our great friends at Unilever.

  • The salesforce.com platform is the world's number one enterprise class platform.

  • It continues to be our best growing product line, and companies are absolutely rationalizing how they build applications today.

  • They recognize their old client/servers are -- old client/server tools are dead and they need a new generation of application development and deployment tools, and they're looking for the Cloud.

  • But there is no more secure, more scalable, no more reliable solution than salesforce.com's core force.com platform, which is what our customers are choosing to build their next-generation enterprise applications.

  • And I even met with a large financial services customer today -- sorry, this week, and it reinforced to me the tremendous opportunity of the salesforce.com platform with our customers to build applications.

  • I'm thrilled to announce that we now have more than 1 million developers on this platform and over 3 million apps have already been developed.

  • That's more than -- and there's more than 360,000 force.com apps, more than 2.7 million Heroku apps.

  • I've never been more excited about the future of our platform.

  • The combination of our vision, our clear leadership in each of these four core markets, it's what's driving our success with customers today.

  • We've had incredible wins, and in the quarter there were so many incredible new relationships for salesforce.com, but a few I want to mention.

  • Royal Philips Electronics, a leader in healthcare lighting, consumer lifestyle products, and a great example how companies are connecting with their customers like never before.

  • Philips selected the Sales Cloud, the Service Cloud, and Chatter to connect millions of products onto a single customer network.

  • From toothbrushes and coffee makers to new LED lighting products, all of them are going to be connected through salesforce.com and our customer platform, and customers are going to be able to connect their products to trusted retailers, an entire universe of incredible information, experts, tools, videos, everything they need to be deeply connected with Philips.

  • I'm personally very excited about that.

  • I'm a huge Philips customer personally.

  • I love all of their products, from lighting, especially the toothbrushes, and I am looking forward to the connected toothbrush.

  • Unilever, I talked about Unilever in Q3.

  • They selected salesforce.com to build an app for more than 7,500 marketers and agencies to connect, share, collaborate, and in the fourth quarter Unilever went big with us with Chatter.

  • Chatter will be the social air for Unilever's entire enterprise, unifying more than 80,000 employees around the world.

  • And with the Marketing Cloud and salesforce platform, Unilever is building these exciting new social apps and these exciting new capabilities to become a customer company.

  • And when you look at companies like Philips, when you look at companies like Unilever, and I'm sure you saw Unilever present this year in New York, it's just an absolutely incredible capability.

  • In the high technology area, I'm thrilled to announce Intuit, one of the world's largest software companies and one of our peers, implemented our Service Cloud in its TurboTax business to enhance customer care experience in both its service agents and more than 25 million customers, and rapidly deployed salesforce for 4,000 call center agents.

  • It was a very exciting opportunity to work with a great company.

  • And we'll continue to see great traction in the automotive industry, and in fact, we had an amazing opportunity this quarter with Renault-Nissan Alliance, the fourth largest automotive company in the world.

  • They selected the Sales Cloud and the Service Cloud to enable car owners in key markets to connect the entire Renault and Nissan ecosystem.

  • And we see them becoming the next incredible customer company.

  • Adding to our momentum, in the quarter we signed on a number of incredible enterprises all over the world to become customer companies, including Aetna and Caterpillar, Heidrick & Struggles, Herman Miller, Infosys, KDDI, Lexmark, Novartis, Optus, Sony, Sunlight, Tada, and I'm delighted to also mention Wal-Mart.

  • And the list goes on and on.

  • In every one of these examples, companies are transforming their businesses with salesforce's next generation of technologies and our ability to deeply integrate our social solutions, our social enterprise network, and our customer company solutions to replace that traditional enterprise solution from Microsoft, SAP, and Oracle.

  • There's no better barometer for customer success than usage.

  • Our service continues to [poor us] support and deliver transactions for customers in an unprecedented scale.

  • I'm thrilled to announce that at November 2012, salesforce delivered its first 1 billion transaction day.

  • To put that into context, that's more than double the number of posts on Twitter every day.

  • We're dealing in complex transactions, complex customer transactions for each one of our customers, and more exciting, we delivered 250 billion transactions for our customers in the full fiscal year, up 65% in transaction volume from a year ago, to really show you that this is one of the most used pieces of software in the world today.

  • Nothing speaks more to the value of salesforce to our customers than the actual uses of our products and the speed, reliability, and trust that we're known for.

  • It's been an amazing year for salesforce, it's been an amazing year for our employees, and it's been an amazing year for our customers, and we're looking forward to being the first enterprise Cloud computing company to help our customers to connect with their customers in an entirely new way to become customer companies.

  • And if you want to see that incredible presentation that we did in New York, it's now up on YouTube.

  • You can find it on my Twitter feed or on my Facebook feed, which is at twitter.com/Benioff or Facebook.com/Benioff.

  • And now, I'd like to turn it over to our Chief Financial Officer, Graham Smith, to tell you about the incredible results of the fiscal year.

  • Graham?

  • Graham Smith - EVP, CFO

  • Thanks, Marc.

  • We delivered a great fourth quarter to conclude another year of record results.

  • In addition to posting solid topline revenue growth in FY13, we improved full-year operating margins slightly, even as we integrated our largest-ever acquisition.

  • And with attrition continuing its steady decline and a growing product set that expands cross-sell opportunities, we are well positioned for another year of strong growth in fiscal 2014.

  • Let me take you through our fourth-quarter and full-year results, starting with revenue.

  • Q4 revenue, as Marc mentioned, was $835 million, up 32% over last year.

  • If you exclude an approximately $6 million FX headwind, revenue on a constant-currency basis was up 33% over Q4 last year.

  • Our full-year revenue was $3.05 billion, up 35% over FY12, and again if you exclude an FX headwind of approximately $44 million, full-year revenue on a constant-currency basis was up 37% year over year.

  • Our recent acquisition of Buddy Media contributed approximately $11 million to fourth-quarter revenue and approximately $20 million to full-year revenue, consistent with the guidance range we issued in June.

  • The Marketing Cloud product line continues to gain traction and is an important growth lever for us as CMOs look to rapidly transform the entire customer experience for the social era.

  • Excluding revenue from Buddy Media and all our acquisitions, beginning with Jigsaw, revenue for the full fiscal year still grew in excess of 30%.

  • Stated differently, revenues from these same acquisitions comprised a little over 5% of total FY13 revenue.

  • Clearly, we expect this proportion to continue to increase over time.

  • Looking at year-over-year growth on a regional basis, revenue in the Americas grew 34% to $583 million.

  • Revenue in Europe grew 39% on a constant-currency basis and 37% in dollars to $149 million, another great quarter in Europe.

  • And revenue in Asia increased 22% in constant currency and 17% in dollars to $103 million.

  • Fourth-quarter revenue growth in Asia reflects continued slow demand from enterprise customers in Japan, which does not appear to have fully recovered since the disaster there almost two years ago.

  • Topline revenue continues to benefit from a decline in dollar attrition, which fell for the 14th consecutive quarter and is now at its lowest level since we began measuring dollar attrition 3.5 years ago.

  • During FY13, we continued to invest in a variety of customer success measures, including our Customers for Life program and our True to the Core initiative.

  • Investments in these areas, along with a slow but generally improving macroeconomy, longer contract durations, and increasing enterprise adoption, have helped drive attrition downward.

  • Turning to the income statement, non-GAAP operating income was $108 million in the fourth quarter, up 29% over Q4 last year.

  • Our Q4 non-GAAP operating margin was approximately 12.9%, or about 32 basis points lower than Q4 last year.

  • The operating margin decline year over year is related to our acquisition of Buddy Media, where we are investing significantly for future growth.

  • Non-GAAP operating income for the full fiscal year was $357 million.

  • That's up 36% over FY12.

  • This translates to an FY13 non-GAAP operating margin of 11.7%, up 16 basis points over FY12.

  • This improvement in full-year operating margins was driven by greater leverage in G&A, which declined by just over a percentage point of revenue, partially offset by the impact of recent acquisitions.

  • We added more than 480 new employees in Q4 and more than 2,000 for the full fiscal year, bringing our total year-end headcount to 9,800, up 26% over Q4 last year.

  • Remember, during FY12, we accelerated hiring significantly after a period of slower headcount growth.

  • For fiscal 2014, we expect to continue hiring at roughly the same rate as for FY13.

  • Turning to EPS, non-GAAP EPS was $0.51 for the fourth quarter and $1.63 for the full fiscal year.

  • Non-GAAP EPS was about $0.11 above planned to the guidance range we provided back in November.

  • Approximately $0.08 per share of the beat was due primarily -- was due to the reinstatement of the US federal R&D tax credit and about $0.03 per share was related to better-than-expected operating margins on higher-than-expected topline.

  • Turning to cash flow, Q4 operating cash flow was $282 million.

  • That's up about 17% over Q4 last year.

  • Operating cash flow for the full fiscal year was $737 million.

  • That's up approximately 25% over last year.

  • Operating cash flow was slightly higher than we anticipated in Q4 as a result of the timing of a particular invoice.

  • Our standard process is to issue invoices approximately 30 days in advance of the service period covered by the invoice.

  • This means that the first renewal invoice on an annual billing contract goes out about 11 months after the initial contract date.

  • So if we sign a significant contract in the very early days of our first quarter, than the next annual invoice can be issued and, in some rare cases, collected in our fourth quarter.

  • This dynamic can affect accounts receivable, deferred revenue, and cash flow.

  • In the fourth quarter, we billed and collected an approximately $30 million invoice that was billed as new business, clearly, in the first quarter of fiscal 2013.

  • Looking ahead for FY14, we expect operating cash flow to grow in the low 20% range.

  • As long as we're investing for significant growth, you should expect operating cash flow to grow a bit more slowly than revenue.

  • CapEx in the fourth quarter was $51 million.

  • That's up 13% over Q4 last year, and $176 million for the full fiscal year.

  • That's up about 16% over FY12.

  • CapEx continues to be driven by new office buildouts related to our growing employee base.

  • CapEx as a percentage of revenue was approximately 6% for both the fourth quarter and the full fiscal year.

  • That's down from about 7% last year.

  • So for FY14, we expect similar CapEx spending as a percent of revenue.

  • Free cash flow, which we define as operating cash flow less CapEx, was $231 million in the fourth quarter, up 18% over Q4 last year.

  • For the full year, free cash flow was $561 million.

  • That's up 28% over 2012.

  • Turning to the balance sheet, we ended the year with approximately $1.8 billion in cash and marketable securities.

  • That's up from approximately $1.4 billion last year.

  • Accounts receivable was up 28% over last year to $873 million, and our receivables again remain in great shape.

  • Deferred revenue in the fourth quarter was approximately $1.9 billion, up 35% over Q4 last year.

  • Excluding a year-over-year FX tailwind of approximately $7 million, deferred revenue increased 34%.

  • On a sequential-quarter basis, deferred revenue benefited from an FX tailwind of approximately $13 million.

  • Deferred revenue in the fourth quarter continued to benefit from the shift toward annual billing we initiated in the fourth quarter last year.

  • Approximately 80% of all invoices in Q4 were issued with annual terms, about three to four percentage points higher than Q4 last year.

  • For modeling purposes, we expect one to two percentage points of continued year-over-year improvement in annual invoicing through the third quarter.

  • The dollar benefit to deferred revenue from the continued shift to annual billing, together with the large multiyear invoice we issued in the fourth quarter of last year, was approximately $125 million, down from approximately $155 million in Q4 last year.

  • Keep in mind that the $30 million renewal invoice that I mentioned earlier also contributed to the increase in deferred revenue this quarter and will obviously affect our sequential deferred revenue comparison in Q1.

  • For the first quarter, we anticipate reported year-over-year deferred revenue to grow in the high 20% range.

  • As we've always said, the deferred revenue is a difficult number to predict, and this quarter was no exception.

  • Invoice timing, duration, FX, new business linearity, rent deals, annual seasonality, and the compounding effects of renewals all influenced deferred revenue balances and comparability of sequential and year-over-year changes.

  • Unbilled deferred revenue, or revenue that is contracted but not yet invoiced and is off the balance sheet, was approximately $3.5 billion in Q4.

  • That's an increase of 60% over Q4 last year.

  • Deferred revenue plus the unbilled backlog now exceeds $5.3 billion.

  • As we continue to become a larger and more strategic partner to our customers, both enterprise and commercial accounts are making longer commitments to salesforce.

  • This is reflected in our growing backlog and declining attrition.

  • In fact, as I referenced earlier, our typical contract length has grown and is now between 12 months and 36 months, and our average contract duration is now more than 24 months.

  • Before I discuss guidance, I want to emphasize that growth remains our top priority.

  • We continue to see a tremendous opportunity for our products and we'll continue to emphasize investment, distribution capacity, and engineering as we grow towards our $10 billion goal.

  • As you know, acquisitions have become an important part of this growth strategy, so where we start every year, with a plan to improve operating margins.

  • It's possible that M&A activity this coming year could well impact operating margins, just as they did in fiscal 2013.

  • Turning to our outlook for fiscal 2014, as Marc mentioned we're very pleased to raise our revenue outlook range for fiscal 2014 by $20 million.

  • So we now project FY14 revenue in the range of $3.82 billion to $3.87 billion.

  • That is a growth range of 25% to 27%.

  • We estimate full-year non-GAAP EPS in the range of $1.93 to $1.97.

  • This guidance range implies an increase in non-GAAP operating margins of 50 to 100 basis points, a slightly higher full-year effective tax rate of approximately 35%, and no meaningful contribution from below-the-line interest or other income expense.

  • And just as a reminder, Dreamforce will be in our fiscal fourth quarter this year, and we estimate that the net impact to both GAAP and non-GAAP EPS will be approximately $0.09, which is included in our estimates.

  • For Q1, we anticipate revenue in the range of $882 million to $887 million, including an expected FX headwind versus Q1 last year.

  • We expect non-GAAP EPS in the range of $0.40 to $0.42.

  • As a reminder, all of the underlying assumptions for our non-GAAP and our GAAP guidance, and a complete GAAP to non-GAAP reconciliation, can be found in our earnings press release issued earlier today.

  • So to wrap up, we had a great finish to fiscal 2013.

  • We posted strong topline growth and improved our operating margins year over year.

  • We continue to manage attrition downward, and with rising enterprise adoption and a growing product set that expands cross-sell opportunities, we are well positioned for another year of strong growth.

  • So with that, we'll open the call up for questions.

  • Kim?

  • Operator

  • (Operator Instructions).

  • Adam Holt, Morgan Stanley.

  • Adam Holt - Analyst

  • Hi, thanks very much, and congratulations on a great end to a great year.

  • My first question is about the Force business and the strength there.

  • Are you seeing higher attach as you're doing more large deals around SFA extensions or are you seeing expanded use cases that continue to perpetuate the Force strength?

  • Marc Benioff - Chairman, CEO

  • Well, I think it's a great question, and I really appreciate that, because we've been focused on building our platform now for many, many years.

  • And of course, you know, we provide a single customer platform that lets you accomplish what you need to do with sales productivity.

  • It lets you accomplish what you need to do in customer service and support in call center.

  • It allows you to accomplish what you need to do in marketing, whether it's listening, publishing, or advertising, and we really didn't even get into some of the exciting announcements that happened this quarter with the Marketing Cloud, including our exciting relationship with Twitter and being the pioneer with Twitter API and connecting our new social advertising product with that.

  • What I can tell you is that in each and every customer case, we're seeing expanded use of our platform.

  • And I was with a large financial services customer, as I mentioned, this week in New York, and it's a company that has built many applications on our platform, and it wasn't really surprising to me that we're starting to talk about it becoming their standard way of building all their applications.

  • It's a faster way to build applications.

  • It's certainly a lower-cost way to build applications.

  • It's an easier way.

  • It's elastic.

  • As companies change and evolve, the platform can move with them.

  • These are not characteristics that you found in the client/server world, and that's why the platform is so attractive to so many customers.

  • Also, we've really doubled down on our relationships with the large systems integrators.

  • You see them at our shows, like in New York.

  • You'll see the big SIs, whether it's the well-known ones like Accenture or even the mid-tier market size, many of whom we have a very strong relationship with, having a lot more competency with the platform.

  • This gives customers an easier time to deploy it.

  • So I am very optimistic about the future of the platform.

  • I feel that customers understand it more than ever before.

  • They have universally positive experiences with it, and I think that they are going to do more and more with it, and I appreciate the question because it's one of the things I'm especially excited about.

  • Operator

  • Kirk Materne, Evercore Partners.

  • Kirk Materne - Analyst

  • Yes, thanks very much and congrats on the quarter.

  • Marc, I know you and Michael are spending a lot of time out there talking about CMOs, and I was just curious of your perception.

  • Are they ready to take on a full platform approach to some of the challenges that come about with social media or do you see them taking on more of an incremental approach?

  • And if it is the more full platform approach, I guess, how do you feel about having all the pieces there to be able to help them solve their challenges?

  • Thanks.

  • Marc Benioff - Chairman, CEO

  • That's just an outstanding question, and I'll tell you why.

  • When we talk to Chief Information Officers, we talk to them on a very strategic basis in terms of their, you know, decade strategy and what they're going to be doing with their companies going forward.

  • But when we're talking to Chief Marketing Officers, of course they're strategic, but their needs are much more tactical.

  • They've got campaigns that are executing today.

  • They have needs that need to get fulfilled today.

  • They have problems that need to get solved now.

  • And those Chief Marketing Officers, they make decisions with a different frame than Chief Information Officers.

  • That's why we encourage these CMOs to partner with the CIOs.

  • We're trying to build a muscle at salesforce that we can talk comfortably with CMOs just like we talk comfortably with Chief Information Officers or Chief Revenue Officers or Chief Service Officers, and certainly Chief Executive Officers.

  • Our job is to be able to sit with that management team, something I did several times this week, and have a holistic conversation about how their company is connecting with their customer.

  • And it doesn't matter who that company is, whether it's General Electric or whether it's Philips or whether it's Bank of America or whoever it is in our portfolio of customers, in each and every case they're redefining, reconceptualizing, and re-energizing their own employees about how they connect their company with their customers, and that's why we call it a customer company.

  • And the CMO is a relatively new entry into the conversation.

  • That's why we spent $1 billion buying Radian6 and Buddy Media because we believe strongly in that.

  • We need to buy more marketing companies.

  • Honestly, there is more for us to do, there's more demand, but we need to innovate in this area.

  • We're going to do some of that holistically, and organically we need to do some of that through acquisition.

  • We want to be the company that you turn to in four key areas -- in sales, in service, in marketing, and, as Adam correctly pointed out as well, in the platform, and these are our four areas of focus.

  • This is what our customers want to hear in how these four categories are the seminal interest for them in becoming this customer company.

  • Thank you for the question.

  • Operator

  • Laura Lederman, William Blair.

  • Laura Lederman - Analyst

  • Yes, thanks for the great quarter.

  • Can you talk a little bit about a sense of how much the business is non-SFA, and more specifically, platform.

  • You mentioned it was the fastest growing, but if you could give us a sense of it's bigger than a bread box, just any way you're willing to frame it, that would be great.

  • Graham Smith - EVP, CFO

  • Laura, I think back in Dreamforce we talked about that shift to non-SFA products sort of continuing, as it has done, really, over the last five years.

  • But it's been a pretty gradual shift.

  • So we actually don't sort of update that number every quarter, but I think -- I suspect it's probably pretty close to what we said to Dreamforce, which I think was roughly 55% roughly SFA and 45% non-SFA.

  • So I think as our newly acquired or more recently acquired businesses continue to grow at a faster rate than the Sales Cloud over time, we would expect that mix to continue just to shift away from SFA, but hopefully not too fast.

  • So there's really no news there.

  • Laura Lederman - Analyst

  • Thank you.

  • Operator

  • Kash Rangan, Bank of America Merrill Lynch.

  • Kash Rangan - Analyst

  • Hi, thank you very much.

  • Eight years after the IPO, you guys still keep putting up these big numbers.

  • Great to see that.

  • Marc, I just wanted to ask you about the Marketing Cloud.

  • Clearly the emphasis of the Company has been more on the consumer/social end of things.

  • Do you foresee making a bigger push into the B2B site of marketing and other aspects of marketing automation?

  • And also, secondarily, as related to that, can you talk about if there's any possible halo effect of all this marketing emphasis as it relates to your other businesses?

  • Are the sales, service, and platform clouds getting a bit of a halo effect from that emphasis on marketing?

  • Thank you.

  • Marc Benioff - Chairman, CEO

  • It's a great question, Kash, and I'll give you a detailed answer because I have to tell you that it's been one of my really delighted surprises that I experienced specifically this quarter.

  • I had the opportunity to present to a very large consumer packaged goods company, presenting to their management team, and that was being led -- the meeting was being led by their Chief Marketing Officer.

  • And we had a very good relationship with this company already and we were going through their use of various things, and we were doing a large transaction with them and evaluating their use of the Sales Cloud, evaluating their use of the Service Cloud, Marketing Cloud, and Chatter.

  • And then, the CIO of this company -- this is one of the largest companies in the world -- said, well, this is fantastic.

  • We're standardized now on salesforce's Marketing Cloud.

  • I'm really excited about that and we've been smothering our users and our customers with love on Facebook and Twitter, but have we brought our call centers into this equation?

  • Have we updated all of our contacts in our software?

  • Are we bringing in the customer service software?

  • And for the first time, I firsthand personally watched in real time the Chief Marketing Officer take over the conversation on customer service.

  • And of course, it's completely logical that that Chief Marketing Officer would say that, but it was a leap for me, even, to see it happen right in the room because the CIO was there.

  • And the CIO, their job was to, in real time, work with the CMO and the service professionals in the room and say, we're going to have a unified customer strategy.

  • We're going to offer that customer a great experience on the call center, on Facebook, on Twitter, on the website, on portals, in the product, with our sales organization.

  • And what we had been pitching them is unified customer record where you're not just managing the customers' data, their name, addresses, phone number, their photo, their connections with the social networks.

  • Geographic intelligence around what part of the world they're in and using the mapping technology, but also we're able to see, here is the customer.

  • Here's the apps they've downloaded from the app store.

  • Here's the scripts from the customer service website they went to.

  • Here is their tweets on Twitter and their Facebook entries, and here's the opportunities to sell them more.

  • Here's a comprehensive view of a customer.

  • And the person who is interested in that is not the sales officer, necessarily, or the service officer or even the CIO.

  • All of them are, but it's really being driven by the Chief Marketing Officer.

  • And that is, I think, going to be an increasingly critical part of our strategy as we work to make our customers into these customer companies.

  • Operator

  • Rick Sherlund, Nomura.

  • Rick Sherlund - Analyst

  • Thanks.

  • Marc, just to follow-up on the Marketing Cloud, if we look at Oracle's acquisition of Eloqua, I'm wondering if you could just kind of touch on what the holes are you may see in your marketing strategy, based on that, and is this something that you can fill with just some small acquisitions or does it require something bigger?

  • Marc Benioff - Chairman, CEO

  • Well, I really think, Rick, that we're going to buy small and big.

  • We're going to be aggressive.

  • We need to look at everything, and I think that we made some smart moves by buying the two leaders and we bought other companies, too.

  • You probably saw we bought this incredible startup as well last year in this area called GoInstant, and we have our first customers now on board in the beta of that, which is this amazing co-browsing technology, which is the ability to instantly share my website across devices.

  • We've purchased a lot of different types of companies, as I think we've purchased more than two dozen companies, and they've been small companies and large companies.

  • And the best way to predict the future of our acquisition strategy is to look at the past, and because we bought small and big, we're going to probably buy small and big.

  • And I don't think that we should limit ourselves in any way.

  • And to answer your question specifically and to answer Kash's question specifically, we have to look at B2B marketing, B2C marketing.

  • We have to look at e-mail marketing; we have to look at all aspects of social marketing.

  • I have to tell you that our social advertising business is maybe, I think, the fastest growing business that we have today.

  • And advertising was not something that was on our radar a year ago, and here we are as a leader in managing ads on Facebook and Twitter.

  • The world is moving fast.

  • Things are changing.

  • It's unpredictable.

  • All I know is that our customers need new ways to manage their relationships with their customers, and we need to give them a comprehensive vision and approach and strategy to do that.

  • I'll tell you it's hard to articulate not just to you on this call when you ask me specific questions, what things do you still need.

  • Even when we presented, and I don't know if you had the opportunity to watch the presentation on Tuesday, but we have a broad, broad demonstration of technology there that cuts through a lot of things.

  • And it's not as easy as saying, well, we have your SFA solution and it's these 10 features that you really care about.

  • We have your service solution and it's these 10 features.

  • We have your social enterprise network solution with Chatter.

  • We have these 10 new features or this new thing on the app store.

  • We have our platform, which has these 10 features, or we have the Marketing Cloud, which has these 10 features, because the 10 features that we thought that were important with the Marketing Cloud a year ago are still important, but there are some very exciting new things as well.

  • And I think other companies are excited about that, also, and I'm very impressed with how a lot of different companies are organizing and reorganizing and acquiring and so forth.

  • I think those are smart moves because the world is changing quickly.

  • But honestly, I think that we're doing the best job in executing this strategy.

  • We have a very clear vision of building this unified customer platform, and I don't see any other company doing that.

  • I see companies building appliances and I see companies building data warehousing solution and I see companies building hardware.

  • I see companies introducing the next version of their software with another number after it, but the reality is we're the company that companies are coming to as the company that's going to connect their customers.

  • This is the area that we've carved out of the industry.

  • This is what's important to us and, look, I think it's just excellent that SAP wants to be the HANA company, Oracle wants to be the Exadata company, Microsoft wants to be the Windows 8 company, salesforce wants to be the customer company.

  • That's how the chips have fallen on the table.

  • Operator

  • Heather Bellini, Goldman Sachs.

  • Heather Bellini - Analyst

  • Hi, thank you very much.

  • Marc, we're going to be with Wendy Clark from Coke tomorrow, and where -- I'm just wondering, where are other leading brands in matching kind of Coke's vision of the customer company that you talked about on Tuesday?

  • And I guess, how have you seen the conversations you've started having with CMOs and CIOs over the last 12 months change?

  • I guess I'm just trying to get a sense of where they are in getting it, so we can get a sense for how quickly we could see this continue to ramp.

  • Marc Benioff - Chairman, CEO

  • It's a really great question and I'll tell you that we're at the beginning of a journey here with all of them.

  • This is certainly not -- we're not in the second inning on it with any company in this area.

  • A great example of Coca-Cola with Ed Steinike, who we've worked with now probably for a decade, who is their global CIO.

  • And he was at Coke, and then before that, he was at General Electric, and then he went to ING and he was our customer there, and then he came back to Coca-Cola.

  • We weren't working with Wendy and the marketing team and other marketers there before.

  • That's relatively new for us.

  • It's exciting.

  • And that's a great metaphor for all of our customers.

  • We've built great relationships over the last 14 years of -- salesforce is going to be 14 years old on March 8. That's our overnight success.

  • So in eight days, salesforce is 14 years old, and over that time we have worked to build our sales organization, invest in that, and build relationships, trusted relationships, successful relationships with the world's most important Chief Information Officers and certainly with the top heads of sales.

  • You know, we have good relationships with them all over the world.

  • Over the last few years now, we've focused on the service organizations.

  • We're still really much at the beginning of that story.

  • When we hired an incredible executive through an acquisition of a French company called InStranet, who's now the President of our applications and platform, Alex Dayon, who built the Service Cloud, and so we had sales, we had service, we had our platform.

  • We had relationships with these executives, with the CIOs.

  • Only really in the last year, you could argue 18 months, that we're starting to have the conversation with the Chief Marketing Officer, and they want to understand all aspects of what -- our message and this is a new audience for us that the thousands and tens of thousands of Chief Marketing Officers inside of our customers, those are not sales calls that we've been making.

  • And we're starting to make those calls.

  • We're starting to build those relationships.

  • Buying a company like Buddy Media certainly helps.

  • I mean, that was not just buying the technology.

  • That wasn't just buying a product.

  • That was also, you know, an incredible executive with Michael Lazerow, and also an ecosystem surrounding that company.

  • I think it's very important to buy the leaders because they're run by the leaders.

  • When we bought Radian6, we got an incredible executive with Marcel LeBrun, and when we went to the chief -- when we went to the Consumer Electronics Show just a couple weeks ago, I was walking around and I bumped into Ed Steinike, actually, in front of the Sharp booth.

  • We were looking at the incredible new 8-K Sharp TV, which is a spectacular technology achievement, and Ed and I were marveling at that.

  • But I was marveling at I was bumping into the global CIO of Coke at the CES show randomly in front of the Sharp booth, and what that said to me was, okay, the world is really changing because this is a marketing show.

  • And at that show, we built on the trade show floor, in concert with the Consumer Electronics Association, a huge social media command center because listening is the first thing that all these marketers want to do.

  • They want to know what are people saying about their brands on Facebook and Twitter and blogs and websites, and we are the number one provider of listening solutions in the world.

  • And after listening, the second thing that they want to start doing is publishing.

  • They want to publish on all these things in a unified way.

  • And the third thing they want to do is advertise on all these things, and we're the leader in social advertising.

  • So this is a very important conversation, but as I mentioned before, the CMO just isn't interested in listening, publishing, and advertising and some of the other things that Kash and Rick mentioned.

  • They're also very interested in the call center.

  • They're interested in the sales force.

  • They view those as part of their domain.

  • The CMO views the actions of the salesperson and the service professional as part of the brand, and we have a comprehensive message.

  • And that's why you've see me pivot from social enterprise to customer company because I needed to embrace those Chief Marketing Officers, sales officers, service officers and CIOs in a comprehensive message, and that was catalyzed by our acquisitions of Buddy Media and Radian6.

  • And this is the story of our Company now over the last 14 years, and I appreciate that question, so thank you.

  • Operator

  • Brent Thill, UBS.

  • Brent Thill - Analyst

  • Thanks.

  • Graham, you gave us some great granularity on the mega-deals last Q4, and I was just curious if there are any anomalies this Q4.

  • And correct me if I'm wrong, I believe you were flat year over year in terms of the eight-figure transactions.

  • Graham Smith - EVP, CFO

  • Yes, I think we were up slightly on the eight-figure transactions.

  • I think we were up comfortably on the overall seven- and eight-figure transactions, so we were delighted with the end result.

  • Operator

  • Mark Murphy, Piper Jaffray.

  • Mark Murphy - Analyst

  • Thank you, Marc.

  • We are starting to come across more companies which are contemplating using salesforce.com as their main Cloud computing platform and trying to tie that in with a whole host of other applications to try to re-energize and change the way they do business.

  • In some cases there, they seem to be looking at salesforce as a transformational vehicle, and that sounds very different than just implementing like a back-office payroll or financial system.

  • So I'm wondering, what do you think you have to do to drive these customer or company transformations past the realm of the early adopters and the thought leaders and try to make this become a more mainstream undertaking in the near term?

  • Marc Benioff - Chairman, CEO

  • I think that's squarely in the wheel house of where we are today, which is we're a transformational company.

  • We've always been a transformational company.

  • We're a company that was founded on the concept of transforming the industry and we're a company that is founded on the concept of transforming our customers.

  • I think now we're a company that's about transforming our customers' relationship with their customers.

  • How do we do that in sales, service, marketing, and our platform, helping our customers to sell, service, market, and succeed, and connect with their companies in entirely -- connect with their customers in entirely new ways.

  • And what you're finding is as we work with these companies, and of course, I talk about a lot of different companies.

  • We saw that at the New York City conference this week.

  • We had this incredible retail company, Levia, stand up and talk about that their manufacturing process is entirely built on salesforce.

  • Their service process is on salesforce.

  • Their sales process is on salesforce.

  • Their marketing process is on salesforce.

  • We are their sole platform that they've used to transform their company, and they did that in partnership with a local systems integrator.

  • That's the story.

  • And of course, we want to do that with every company in the world.

  • You know, it's a journey because maybe a company hasn't heard about Cloud, maybe they haven't heard about mobile, maybe they haven't heard about social, maybe they haven't heard about social enterprise.

  • Maybe they haven't heard about the transformation that they need to make to become a customer company, but they all need know they need to change.

  • And that's where we are today.

  • It doesn't matter if it's a retailer or a manufacturing company or a high-technology company or a financial services company.

  • I don't know a company today and their Chief Executive Officer who doesn't feel a strong desire to transform.

  • That was not true five years ago.

  • That was not true in the -- in the financial crisis, I think people were just trying to hang on in 2008.

  • Today, these companies are, okay, we're stable, we're good, we know what our business is, now we need to transform so that we can grow.

  • And this transformation is happening for a reason.

  • It's happening because these companies want to grow and they're going to grow with increasing their revenues.

  • These are revenue augmentation solutions.

  • So I completely agree that that's what you're seeing and that's why I believe you're seeing it.

  • We're moving into a growth -- time of growth in the world.

  • John Cummings - IR

  • Kim, we're reaching the top of the hour here, so I think we have time for about one more question.

  • Operator

  • Brad Zelnick, Macquarie.

  • Brad Zelnick - Analyst

  • Thank you very much and congratulations.

  • Marc, I was at IBM's analyst day today where Ginni Rometty talked about moving more to the front office, becoming more social, more mobile.

  • And it's interesting to see such a great company follow your lead.

  • But they also talk a lot about big data.

  • And I just wanted to get your thoughts on what that means, and what the opportunities are to harness the billions of transactions and all the data that lives within your platform.

  • Marc Benioff - Chairman, CEO

  • You're opening the door for, I think, one of the most exciting changes that will happen, and not just in our company, but the entire industry.

  • Today, we are a big data provider.

  • We manage huge amounts of data for a customer, and we do millions and millions and millions of dashboards for our customers.

  • You've seen the analytics that come out of our system.

  • But you just can look around Silicon Valley right now and see this huge amount of work going on between these entrepreneurs and venture capitalists in this big data area.

  • And I think that they've changed everything.

  • I really take my hands off to the technology industry because over the last 18 months, I've seen the shift in big data analytics at a speed and a level of complete transmutation of what the technology can do.

  • It used to be that we had to rely on these very expensive technologies to make this happen.

  • Now these are very low-cost technologies and I am quite confident that it's going to change us.

  • And one of my personal goals is that by Dreamforce, we have a more comprehensive and a more detailed and even stronger solution for our customers in this area.

  • We will continue to work with strong partnerships with all the providers that we work with in the big data analytics area, but what we want to do more in that area ourselves, natively, as well.

  • John Cummings - IR

  • All right, that about does it for today.

  • Thanks so much, everyone, for joining us.

  • If you have any follow-up questions, you can contact us at investor@salesforce.com, and we look forward to updating you on our fiscal Q1 performance in May.

  • Thank you so much.

  • Operator

  • This concludes today's conference call.

  • You may now disconnect.