salesforce.com, inc. (CRM), Oracle Corporation (ORCL): Taking Clients to the Clouds

Since 2009 salesforce.com, inc. (NYSE:CRM) is up nearly 600%. This is no small feat–the company posted better than expected global revenue growth of 30% on a constant currency basis. Operating cash flow totaled $283 million, a 33% increase year over year, but how does this translate into the bottom line long term.

First quarter deferred revenue hit $1.7 billion, up 30% from last years. On a full year basis the company is expecting revenue to reach 3.8 billion, up 26% from last year. This means that Salesforce.com will continue to book revenue gains into the future. The problem with Salesforce’s model seems to be its ballooning marketing costs.

Between 2012-2013, salesforce.com, inc. (NYSE:CRM) saw gross profit increase $800 million, but it also saw expenses increase $860 million. With $750 million on the balance sheet, this company looks like it can continue its race to increase revenue and market share. But as it is doing this, tried and true companies operating in the cloud space are able to provide investors long track records of earnings.

Client relations

salesforce.com, inc. (NYSE:CRM) has high profile clients like Home Depot that are taking advantage of the cloud and social media to drive sales. Salesforce was able to help Home Depot to market siding and roofing sales to general contractors using mobile and social collaboration software. This helped Home Depot better manage its inventory and supply chain to reduce cost, and drive revenue by preventing inventory from sitting idle or being short in areas around the country.

Competition

IBM is one of the few companies that laid out their business plan on how they would double their earnings per share in 5 years, from $10 per share in 2010 to $20 per share by 2015. The SoftLayer acquisition fits nicely into International Business Machines Corp. (NYSE:IBM)’s plan to increase their revenue coming from software, as it shifts away from commoditized hardware. This shift in product offerings has hurt IBM on revenue, but has vastly increased the company’s profitability.