Accounting 300 Project


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Team project analyzing the business of I presented to Accounting 300 class.

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  • Accounting 300 Project

    1. 1. Team 3 Punit Dewani Marianna Feldmansky Stella Karemi Josh Quitoriano Josh Weckesser  
    2. 2. Agenda <ul><li>Background </li></ul><ul><ul><li>What is Sale f </li></ul></ul><ul><ul><li>Competition </li></ul></ul><ul><li>Customers </li></ul><ul><ul><li>Diverse </li></ul></ul><ul><li>Financials </li></ul><ul><ul><li>Key Metrics and Ratios </li></ul></ul><ul><li>Expectations </li></ul><ul><ul><li>Future Growth </li></ul></ul><ul><ul><li>Reasons to Hold </li></ul></ul><ul><ul><li>Loan </li></ul></ul><ul><li>Q & A </li></ul>
    3. 3. Background <ul><li>Founded in 1999 by former Oracle executive Marc Benioff. </li></ul><ul><li>Went public in June 2004 , under the symbol CRM. </li></ul><ul><li>“… was started with a simple </li></ul><ul><li>idea to make business applications as easy to use as a simple </li></ul><ul><li>website. It was our mission to spark what we termed </li></ul><ul><li>&quot;The End of Software&quot; revolution…” </li></ul><ul><li>- Marc Benioff CEO & Founder </li></ul>
    4. 4. What is Sale f <ul><ul><li>The company's services can be accessed </li></ul></ul><ul><ul><li>from devices including PCs, cellular </li></ul></ul><ul><ul><li>phones, and personal digital assistants. </li></ul></ul><ul><li>They are an alternative to </li></ul><ul><li>buying and maintaining </li></ul><ul><li>enterprise software. </li></ul><ul><ul><ul><li>They offer web-based applications. The software resides on servers that are accessed through the internet instead of the more traditional software that is installed on either a local server or on individual PCs. </li></ul></ul></ul>
    5. 5. Generating Revenues <ul><li>(1)   Subscription revenues </li></ul><ul><ul><li>Customers accessing its on-demand application service </li></ul></ul><ul><ul><li>Customers purchasing additional support beyond the what is included in the basic subscription fee; </li></ul></ul><ul><li>(2) Professional services and other revenue. </li></ul><ul><ul><li>Consists primarily of training fees </li></ul></ul><ul><li>Consist of billings and payments received in advance of </li></ul><ul><li>revenue recognition </li></ul><ul><li>Invoiced on an annually or quarterly basis </li></ul>
    6. 6. <ul><li>Leader in customer relationship management (CRM) & cloud computing </li></ul><ul><li>Low fixed costs based on a subscription model. </li></ul><ul><ul><li>$9/user/month for group edition </li></ul></ul><ul><ul><li>$65/user/month for full-featured CRM </li></ul></ul><ul><li>Software stays current since vendor can continuously add enhancements to the web based service. </li></ul><ul><li>Able to synchronize customer and account data from the customer ERP systems with Salesforce using the ApexConnect application. </li></ul><ul><li>System is accessible from any internet connection. </li></ul><ul><li>Gives small businesses access to people highly skilled in managing mission critical data. </li></ul><ul><li>May integrate with other online or offline applications, such as WebEx, Treo Phones, etc. </li></ul>Competitive Advantages  Disadvantages <ul><li>May not communicate with other in-house systems. </li></ul><ul><li>May not be customizable as an in-house solution. </li></ul><ul><li>May be slower than a client application accessing data on your own </li></ul><ul><li>network. </li></ul><ul><li>Occasional outages causes customers to move to the competition due </li></ul><ul><li>to the mission critical nature of the application .                 </li></ul>
    7. 7. Key Competitors <ul><li>The enterprise software giant </li></ul><ul><li>Provides a range of tools for managing business data, supporting business operations, and facilitating collaboration and application development. </li></ul><ul><li>Used acquisitions to expand its product lines by purchasing PeopleSoft, </li></ul><ul><li>Siebel, Hyperion and BEA Systems. </li></ul><ul><li>Revenue is 23.23B </li></ul><ul><li>Provides a variety of business management applications and industry-specific applications for customers </li></ul><ul><li>Caters to small and midsized companies </li></ul><ul><li>More than 2.7 million organizations in North America operate their business with Sage. </li></ul><ul><li>Revenue is 1.16M </li></ul><ul><li>Provides sales, marketing, and customer support software and services. </li></ul><ul><li>The company primarily targets small </li></ul><ul><li>and midsized businesses. </li></ul><ul><li>Founded in 1989. </li></ul><ul><li>Acquired January 2006 by Francisco Partners for 200M. </li></ul><ul><li>Revenue is 38.6M </li></ul>
    8. 8. The overall CRM market is expected to reach $18 billion by 2010 Data as of 11/13/08 Hoovers Inc. Competitors Overview
    9. 9. 47,700+ Customers Cisco Google
    10. 10. &quot;Combining the power and simplicity of Salesforce with Google AdWords helps businesses find and keep customers to ultimately drive their continued success.” -Eric Schmidt, CEO Google Diverse Customer Appeal
    11. 11. Financial Analysis
    12. 12. Net Income Gross Profit and Revenue
    13. 13. Revenue By Region
    14. 14. Cash from Operating Activates
    15. 16. <ul><li>Invoiced on a annually or quarterly basis </li></ul><ul><ul><li>Indicates that the company will recognizes these revenues as accordingly </li></ul></ul><ul><li>Categorizes deferred revenue into two parts </li></ul><ul><ul><li>Current deferred revenue </li></ul></ul><ul><ul><li>Noncurrent deferred revenue </li></ul></ul>Deferred Revenue
    16. 17. Projected vs. Actual <ul><li>Predictions for third quarter performance </li></ul><ul><ul><li>Revenue - 273 – 274 Million dollars </li></ul></ul><ul><ul><li>EPS - $.08 - $.09 </li></ul></ul><ul><li>Actual third quarter performance released November 20, 2008 </li></ul><ul><ul><li>Revenue – 276.487 Million </li></ul></ul><ul><ul><li>EPS - $.08 </li></ul></ul><ul><li>November 19, 2008 to November 20, 2008 the market reacted and the stock price jumped up 4% from 21.96 to 22.83 </li></ul>
    17. 18. Team Recommendations <ul><li>Hold, Sell or Buy? </li></ul><ul><ul><li>Analyst Opinions </li></ul></ul><ul><ul><li>Future Earnings </li></ul></ul><ul><li>Lend? </li></ul><ul><ul><li>Key Ratios </li></ul></ul>
    18. 19. Analyst Opinions <ul><li>Concerned with valuation (P/E ~ 83). </li></ul><ul><li>Believe companies bookings have softened during Q3 ’09 </li></ul><ul><li>Expected to lose revenue from small businesses (SB) due to </li></ul><ul><li>global economic slowdown as SB focus on cost savings. </li></ul><ul><li>New competition from Microsoft and Oracle could erode margins. </li></ul><ul><li>Cash flow from operations down 67% from same period a year ago. </li></ul>*Wedbush Morgan Securities **Jeffries and Co. Recommendation is to HOLD
    19. 20. Future Growth <ul><li>Integration of Acquisitions </li></ul><ul><ul><li>InStranet </li></ul></ul><ul><ul><ul><li>Knowledgebase Search for Call Centers </li></ul></ul></ul><ul><li>Major Deals and partnerships </li></ul><ul><ul><li>3 year agreement with Dell </li></ul></ul><ul><ul><li>Partnerships with Apple </li></ul></ul><ul><li>Growing number of clients </li></ul><ul><li>Development of customized product line </li></ul>
    20. 21. Should we lend money? Ratio Return on Equity 0.05 Return on Assets 0.02 Profit Margin 0.02 Current Ratio 1.22 Quick Ratio 1.11 DSO 85.01 EPS 0.16 Price/Earnings 165 Long-term Debt/Equity 0.09 Debt/Equity 1.39
    21. 22. Growth Rates North America remains the largest market for CRM, accounting for almost half of global revenues, with total spending on software reaching $4.3 billion in 2007. That will almost double to $7.6 billion by 2012. Europe is expected to exhibit steady, positive growth, rising from $2.6 billion in 2007 to $3.9 billion in 2012, says Gartner.
    22. 23. Questions
    23. 24. Competition Data as of 11/13/08 yahoo financials 1.48 3.65 3.20 P/S: 0.83 0.77 1.98 PEG (5 yr expected): 18.33 16.11 101.78 P/E: N/A 1.100 0.269 EPS: N/A 5.76B 33.44M Net Income: -1.50% 35.85% 5.26% Oper Margins: 4.68M 9.93B 78.72M EBITDA: 59.61% 77.92% 78.66% Gross Margin: 158.57M 23.23B 920.41M Revenue: 19.80% 17.70% 49.00% Qtrly Rev Growth (yoy): 390 84,233 3,046 Employ­ees: 96.50M 91.34B 3.31B Market Cap: Industry ORCL CRM
    24. 25. Proxy Items: Voting agenda <ul><li>Election of directors </li></ul><ul><li>Reappointment of auditors </li></ul><ul><ul><li>The business has been growing exponentially (revenue growth of 60% and 51% for 2007 and 2008, respectively) while the Audit fee seems to be increasing at a much lesser pace (22% in 2008) </li></ul></ul><ul><ul><li>Is the fee sufficient to ensure audit quality is maintained? </li></ul></ul><ul><ul><li>What improvements has management implemented that justify the modest fee increase vis-à-vis growth in business? </li></ul></ul><ul><li>Approve amendments to the 2004 Equity Incentive Plan (mainly stock options) </li></ul><ul><ul><ul><li>to eliminate the annual automatic share replenishment from such plan and increase the number of shares authorized for grant by an incremental 7,500,000 shares; </li></ul></ul></ul><ul><ul><ul><li>to enable incentive compensation under such plan to qualify as deductible “performance based compensation” </li></ul></ul></ul>
    25. 26. Footnotes <ul><li>The Company should be clear on the dollar value impact of the patent infringement settlement with Triton IP, LLC. This could be the reason for the significant increase in that account in the balance sheet ; </li></ul><ul><li>The Company owns 65% interest in a Joint Venture. Given the Company’s majority ownership interest in the joint venture, the accounts of the joint venture were consolidated with the accounts of the Company , and a minority interest was recorded ; </li></ul>
    26. 27. Footnotes (cont.) <ul><li>In March 2007, the Company acquired 100% of the outstanding stock of a corporation, whose principal asset was developed technology, for $5.3M. The Company accounted for this acquisition as a capital expenditure as the acquired entity did not meet the accounting definition of a business; </li></ul><ul><li>The accounting is different from the April, 2006 acquisition of Sendia, where the Company acquired 100% of Sendia’s outstanding stock. Approximately $1.8M of the purchase price was attributed to assumed debt that was repaid immediately following the close of the transaction. In this acquisition, assets and liabilities acquired were recorded in the company’s balance sheet, the difference between Net Assets acquired and Purchase Price was recorded as goodwill. </li></ul>