ItsAValueTrap Posted December 21, 2012 Share Posted December 21, 2012 Do any of you think that the underlying business is no longer as excellent as it once was? Here is one review of salesforce: http://www.epinions.com/review/inet-ASPs-All-Salesforce_com/content_580011986564 "Was decent but has gone way down hill in late '11-'12. Don't buy! " "Our company started using Salesforce in 2009 and the service was not great, but you could get someone to call you back when you had questions, even if they didn't speak English well, and eventually you could be put through to someone who could help. Since that time the service has become pretty much non-existent." -------------- I own 1 put option. This doesn't feel like a great short. They aren't bleeding money so that won't be an impending catalyst. They have huge amounts of cash coming in due to the stock-based compensation. The product is pretty good too from what I can tell. I guess for my put option to work out ($100 strike, jan 2015) salesforce's CEO has to take his eye off the ball and let the underlying business deteriorate. It seems that they are experiencing growing pains from an aggressive sales force signing up new clients... support that gets back to you in 2 business days is just ridiculous. More balanced reviews/discussions here: http://www.linkedin.com/answers/marketing-sales/advertising-promotion/internet-marketing/MAR_ADP_INM/581448-7718044 http://forums.whirlpool.net.au/archive/1888637 Link to comment Share on other sites More sharing options...
Hoodlum Posted January 26, 2013 Share Posted January 26, 2013 Look like a 1 to 4 stock split is coming and also some interesting comments regarding the reasons for the split. Somehow this will make the company stock more attractive to employees. ::) This might make it more attractive for me to short in the coming months. CRM already up $5 after hours. http://www.forbes.com/sites/ericsavitz/2013/01/25/salesforce-com-making-plans-for-4-for-1-stock-split/?partner=yahootix The Board believes that this considerable price appreciation, and the associated reduction in number of shares of stock covered by equity awards we issue to newly hired and existing employees, has reduced the perceived attractiveness of our employee equity awards.” Link to comment Share on other sites More sharing options...
GrizzlyRock Posted January 26, 2013 Share Posted January 26, 2013 Ok here's my take. The shorts are looking at traditional valuation metrics while all the bulls can see is the revenue growth. So If you are short - here is a powerful catalyst. Miitigation of sales growth figures. When is that going to happen? Perhaps with the next earnings this February. Why? Because of the change in focus last year. By my calculations Benoiff started signing uneconomic long-term contracts last year simply to boost deferred revenue. Here is my analysis: http://www.grizzlyrockcapital.com/Salesforce.com_New_Business_Calcs.xlsx Look at the changes in the quarter ended 1/31/12 (column S) Another piece the bears will like is here (BTW this guy is 19 - what were you doing at 19?): http://valueinvestingletter.com/7-questions-for-salesforce.com-ceo-marc-benioff-from-a-prospective-shareholder.html?utm_source=VIL&utm_medium=E&utm_content=article_7-questions-for-salesforce-ceo-marc-benioff-from-a-prospective-shareholder&utm_campaign=Jan2013Issue&offer=Jan2013Issue I'm not going to post any more on the public thread - hit me up offline if you want to discuss. -Kyle Link to comment Share on other sites More sharing options...
enoch01 Posted January 26, 2013 Share Posted January 26, 2013 When the stock goes up it helps cash come in the door. Is the split a small sign of desperation? Link to comment Share on other sites More sharing options...
nkp007 Posted January 28, 2013 Author Share Posted January 28, 2013 I wonder if they're splitting the shares to make non-gaap loss per share look better on an absolute basis. Link to comment Share on other sites More sharing options...
bobp Posted January 28, 2013 Share Posted January 28, 2013 "the associated reduction in number of shares of stock covered by equity awards we issue to newly hired and existing employees, has reduced the perceived attractiveness of our employee equity awards.” Translation? Employees and potential hires are getting leery of compensation in overpriced stock and we're hoping to fool them with a stock split. Or maybe I'm just looking for negatives. Link to comment Share on other sites More sharing options...
VAL9000 Posted January 28, 2013 Share Posted January 28, 2013 "the associated reduction in number of shares of stock covered by equity awards we issue to newly hired and existing employees, has reduced the perceived attractiveness of our employee equity awards.” Translation? Employees and potential hires are getting leery of compensation in overpriced stock and we're hoping to fool them with a stock split. Or maybe I'm just looking for negatives. Translation: Employees perceive 400 share options at $50 as more appealing than 100 share options at $200. Translation: Our employees can't math. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted January 28, 2013 Share Posted January 28, 2013 It has a slight advantage to small retail investors if it helps them avoid odd lot orders. Odd lots (in CRM's case I think it would be orders not divisible by 100) would receive inferior order execution if they are posted to an exchange. The big picture is that a stock split is pretty irrelevant in the grand scheme of things. Usually it makes sense to focus on the things that matter: the economics of the business, management, valuation, etc. Link to comment Share on other sites More sharing options...
writser Posted January 28, 2013 Share Posted January 28, 2013 One of the reasons they do it is probably psychologic. The stock is already overvalued but at $175 it also looks expensive! Not good for your huge option position. Link to comment Share on other sites More sharing options...
Cardboard Posted March 4, 2013 Share Posted March 4, 2013 Their forecast for FY 2014 assumes $503 million in stock options expense against revenues of $3.85 billion. That is 13% of revenues in expenses that they will exclude from their non-GAAP earnings. It was 10% in FY 2012 and 13% in FY 2013. Even after excluding half a billion dollar in expense, they will still trade at 90 some times of the current price... Forecasted revenue growth remains strong at 26%, but declining and I noticed that cash flow has not kept pace lately with revenue growth and there is a growing interest in all kinds of deferred revenues. I have also heard different stories about difficulties in the implementation of their software and lack of customer service which sounds quite different than the fairy tale that we hear from Benioff. I wonder when Wall Street will stop subsidizing unprofitable enterprises or at least pay rational multiples which include some form of skepticism. Cardboard Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted March 4, 2013 Share Posted March 4, 2013 I'm also short this thing (put option) but I'm doubting myself. Their forecast for FY 2014 assumes $503 million in stock options expense against revenues of $3.85 billion. That is 13% of revenues in expenses that they will exclude from their non-GAAP earnings. They are smart. I have also heard different stories about difficulties in the implementation of their software and lack of customer service CRM software in general is complicated. That's why there are professionals which office services in implementing it. While their customer service may be mediocre (the result of trying to grow at warpspeed?)... a lot of users really like their software. Their software is in a top tier if you compare it to all the other CRM products out there. Somehow they managed to stop reporting GAAP profits... so you could take that as a bad sign. The multiple is ridiculous though. Forecasted revenue growth remains strong at 26%, but declining A decline in revenues is arguably normal. You can't go past 100% market share. At some point it has to slow down right? Link to comment Share on other sites More sharing options...
Guest wellmont Posted March 5, 2013 Share Posted March 5, 2013 One of the reasons they do it is probably psychologic. The stock is already overvalued but at $175 it also looks expensive! Not good for your huge option position. exactly. it's designed to make it more attractive to the uninitiated, who are really the only ones who would buy it at these levels. Link to comment Share on other sites More sharing options...
Phaceliacapital Posted March 7, 2013 Share Posted March 7, 2013 I looked through the numbers and despite the enthousiasm at the beginning of this thread I am a little bit cautious... I mean, without a doubt, once it starts melting it will melt pretty quickly, the million dollar question is ... drums .... when? You would think that investors shiver when they hear non-us gaap, sole focus on revenue etc but this does not seem to be the case. With every earnings call you suspect that the negative feedback loop will start, unfortunately up till now we have only been disappointed. And maybe with regards to my comment above, how far would it actually melt? 50, 60, 80? Would an Oracle/IBM or other giant devour CRM at this price? What are best case scenario's? Can they really go to 10 bn in sales?? How are you guys playing this? The 2014/2015 options? Link to comment Share on other sites More sharing options...
Phaceliacapital Posted March 7, 2013 Share Posted March 7, 2013 And also, for your entertainment, a CRM version of "Where is Waldo", can you spot the earnings? http://s14.postimage.org/yv9le2vn5/CRM_wordcloud.png Generated from their last "earnings" call Link to comment Share on other sites More sharing options...
Sunrider Posted March 7, 2013 Share Posted March 7, 2013 what tool did you use to generate this? Seems like a good thing to do on all sorts of calls to get a very quick overview and perhaps find somethings to probe deeper (indicated as significant by their absence). Cheers - Christian Link to comment Share on other sites More sharing options...
Phaceliacapital Posted March 7, 2013 Share Posted March 7, 2013 And maybe with regards to my comment above, how far would it actually melt? 50, 60, 80? Would an Oracle/IBM or other giant devour CRM at this price? Is there an implied Oracle Put? http://i46.tinypic.com/vhzvrm.jpg what tool did you use to generate this? Seems like a good thing to do on all sorts of calls to get a very quick overview and perhaps find somethings to probe deeper (indicated as significant by their absence). Cheers - Christian http://tagcrowd.com/ Link to comment Share on other sites More sharing options...
Sunrider Posted March 7, 2013 Share Posted March 7, 2013 thanks. Link to comment Share on other sites More sharing options...
writser Posted March 7, 2013 Share Posted March 7, 2013 Never heard of "tag crowds" but I really like the concept. Probably most interesting are the terms missing in the cloud. Where are "expenses", "value", "rational" and "facts"? Link to comment Share on other sites More sharing options...
Phaceliacapital Posted March 12, 2013 Share Posted March 12, 2013 By Tiernan Ray Shares of cloud computing software vendor Salesforce.com (CRM) are down 35 cents at $185.59 after the company this afternoon said it will issue $1 billion of convertible senior unsecured, unsubordinated notes, due 2018, in a private placement. The company said that it expects to engage in hedge transactions with one or more purchasers, and warrant transactions, that will “reduce the potential dilution to salesforce.com’s common stock upon the conversion of the notes.” After the cost of the hedges, the remaining proceeds will be used “for general corporate purposes,” including acquisitions and other things ... Link to comment Share on other sites More sharing options...
Guest fedcep Posted March 15, 2013 Share Posted March 15, 2013 I assume you guys also noticed that they extended their revenue recognition term from "12 to 24" to "12 to 36" months in the risk factors of the latest 10-K, and revenue recognition keeps getting more and more aggressive. They also state that they "have received a notice from a large non-practicing entity alleging that we infringe upon certain of its patents". Does anyone have any more intel on this? This could be an interesting new catalyst for revenue growth slowdown. Thanks in advance. Link to comment Share on other sites More sharing options...
Phaceliacapital Posted March 15, 2013 Share Posted March 15, 2013 Not yet, but looking into it. They also dropped "leading" whenever they describe themselves :D Link to comment Share on other sites More sharing options...
nkp007 Posted March 15, 2013 Author Share Posted March 15, 2013 Anyone thinking of shorting via selling calls? I've never done it before so I'd love to learn. Link to comment Share on other sites More sharing options...
Guest fedcep Posted March 15, 2013 Share Posted March 15, 2013 I wouldn't sell calls, implied vol is very low, and you'd be short gamma. Link to comment Share on other sites More sharing options...
Olmsted Posted March 15, 2013 Share Posted March 15, 2013 They also state that they "have received a notice from a large non-practicing entity alleging that we infringe upon certain of its patents". Does anyone have any more intel on this? This could be an interesting new catalyst for revenue growth slowdown. The phrasing, which specifically includeds "non-practicing entity", sounds like a patent troll to me, no? If that's the case, they're probably looking for a quick payoff then they'll be gone. Probably not much of a negative catalyst. But I know nothing besides the filing. Link to comment Share on other sites More sharing options...
rukawa Posted April 12, 2013 Share Posted April 12, 2013 I wouldn't sell calls, implied vol is very low, and you'd be short gamma. Than it makes sense to buy puts. Didn't know imp vol was low. Thought it would be extremely high. Link to comment Share on other sites More sharing options...
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