During Salesforce.com’s (NYSE:CRM) recent fiscal year Q1 2012 earnings conference call, management jokingly referred to Microsoft’s (NASDAQ:MSFT) efforts to sell undifferentiated, lower priced products as “the Zune strategy”. [1] Management also commented that its flagship product, the customer relationship management (CRM) software, continues to crush competition. Salesforce.com is a pure cloud-computing player and CRM software constitutes more than 60% of our $122 price estimate for Salesforce.com stock. The company not only competes with Microsoft in the cloud computing market, but also with much larger tech firms like SAP (NYSE:SAP), Oracle (NASDAQ:ORCL) and IBM (NYSE:IBM).
Salesforce.com Continues to Crush the Competition
Salesforce.com has consistently gained share in the CRM software market over the past few years, from around 8% in 2007 to 14% in 2010. We expect this growth to continue in the future, as the company rides the overall growth of the cloud computing market.
Salesforce.com management commented that Microsoft’s strategy has had no impact on its business: [1]
It’s the concept that they can take a proprietary, undifferentiated offering at a lower price and somehow make an impact on a high-value, highly differentiated product that’s loved by customers. Microsoft has not changed our exceptional win rates or affected our average selling price with this Zune strategy. [1]
Our $122 price estimate for Salesforce.com stock implies a discount to market price.
Notes:- Salesforce.com FY Q1 2012 earnings conference call transcript, SeekingAlpha, May 20th 2011 [↩] [↩] [↩]
