Salesforce’s strong quarter diminished by departure of co-CEO
Salesforce.com Inc. raised its annual revenue forecast and announced an acquisition to expand the software maker’s growing lineup of cloud-based products after major purchases in the past two years.
But the strong results were overshadowed by the announcement Tuesday that co-Chief Executive Officer Keith Block had stepped down, leaving founder Marc Benioff as the company’s lone CEO. Shares declined about 2% on the news.
“Keith Block’s departure as Salesforce.com CEO dims enthusiasm over a strong 4Q, as he’s been critical to successes over the past seven years and leaves a short-term vacuum,” Anurag Rana, an analyst at Bloomberg Intelligence, wrote in a research note.
Sales will be as much as $21.1 billion in fiscal 2021, the San Francisco-based company said in a statement. Analysts projected $20.9 billion, according to data compiled by Bloomberg, which is at the top end of what the company had forecast in early December.
Benioff and Block have sought to maintain Salesforce’s annual growth rates of more than 25% through frequent acquisitions and international expansion. By the end of the fiscal year, the leader in customer-relations software for the cloud is on target to have doubled its revenue in three years, bolstered by snapping up MuleSoft Inc. in 2018 and Tableau Software Inc. in 2019.
On Tuesday, the company announced it had agreed to spend about $1.33 billion for Vlocity Inc., a startup that makes software hosted on Salesforce’s cloud. Vlocity said it passed more than $100 million in revenue less than five years after it was founded. Its apps focus on six specific industries and help subscribers manage relationships with their customers, including T-Mobile US Inc. and TELUS Corp.
Block joined Salesforce in 2013, was named chief operating officer in 2016 and promoted to co-CEO with Benioff in August 2018.
“Keith’s strategic thinking and operational excellence have deeply strengthened our company,” Benioff said in a statement. Block will be an adviser to the CEO, the company said.
In the fiscal fourth quarter, Salesforce said revenue gained 35% to $4.85 billion, marking the second consecutive period of more than 30% year-over-year growth. Analysts, on average, projected $4.75 billion. Earnings, excluding some items, were 66 cents a share, topping analysts’ estimates of 56 cents.
Revenue from Sales Cloud, the company’s flagship product, grew about 17% to $1.23 billion in the quarter ended Jan. 31. The company leads the market for sales-tracking software, but growth rates have slowed down, prompting Salesforce to diversify its business.
Service Cloud sales increased 26% to $1.22 billion. The software maker offers this tool so companies can communicate with field employees and customers, a space where it faces competition from ServiceNow Inc., Zendesk Inc. and others.
The stock declined to a low of $171.50 in extended trading after closing at $181.27. The shares have increased 12% in the past 12 months.