NEW YORK- Salesforce.com the cloud computing enterprise that is headquartered in San Francisco reported its Q3 results today. The company reported revenue of $429 million which was 30% revenue growth and they increased their number of customers to 87,000 which is 28% growth from last year. But earnings came in at $22 million due to the large amount of compensation expense given to employees which reduced earnings by $25 million. This is a real expense since stockholders own less of the company because of the dilution. Normally these amounts are not significant but the company diluted its shareholders for almost more then their earnings.
The company is valued at a 227 forward PE which could prove to be unsustainable. Investors are betting on the bright future of cloud computing. Not only this, they are also betting that the growth of Salesforce will accelerate. The only way to get the current valuation is if it was known they would grow at 80% a year with no risk. Second we mean earnings, so far Salesforce has shown little bottom line growth. But stockholders love to buy overvalued stocks. We have seen it time and time again and we will see it again. 10 years ago, a maker of telephone equipment was valued 1000 years into the future today, today it is the maker of clouds, but will you still love him tomorrow?
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