August 29, 2013 / 9:52 PM / 4 years ago

Salesforce's raised outlook reassures, lifts shares

SAN FRANCISCO (Reuters) - Salesforce.com Inc raised its fiscal 2014 sales outlook after reporting better-than-expected revenue and earnings on Thursday, reassuring jittery investors that the cloud software company will continue its red-hot growth.

The company raised its full-year revenue guidance to between $4 billion (2 billion pounds) and $4.025 billion, in line with Wall Street expectations of roughly $4 billion.

The forecast sent shares 8 percent higher after the bell to $47.

Salesforce said second-quarter revenue rose 31 percent to $957 million, as demand among corporate customers for cloud-based sales and marketing software remained strong.

That translated into second-quarter earnings of 9 cents a share on Thursday, topping expectations of 7 cents, according to analysts polled by Thomson Reuters I/B/E/S. Salesforce said it expects earnings per share of between 32 cents and 34 cents for the full year.

For the current quarter, Salesforce said it expects to break $1 billion in quarterly revenue for the first time in its 14-year history.

For the past four years Chief Executive Marc Benioff has consistently delivered outsized revenue numbers but has spent lavishly to acquire - rather than internally develop - a new array of product offerings.

In June Benioff snapped up social marketing company ExactTarget for $2.5 billion, a significant bet that reflects his belief that consumer brands will increasingly want software to help them advertise on social media channels like Twitter. The deal for ExactTarget closed in July and helped boost Salesforce’s revenue figures for the second quarter, the company said.

But shares have fluctuated wildly in recent quarters on fears that top-line growth may be losing steam despite Benioff’s heavy expenditures - and given rising competition from competitors including Oracle Corp and SAP AG.

Those fears have been assuaged for now but costs remained high. Research and development costs for the quarter rose 36 percent to $161 million, while sales and marketing costs rose 26 percent to $480.6 million.

In June, the company reiterated its emphasis on selling its new social marketing tools when it hired Keith Block, a 26-year Oracle veteran, to become a corporate president leading global sales.

Reporting by Gerry Shih; Editing by Phil Berlowitz and Andrew Hay

Our Standards:The Thomson Reuters Trust Principles.
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