Salesforce.com Announces Record Fiscal Second Quarter Results

SAN FRANCISCO, Calif. – August 17, 2005 – Salesforce.com (NYSE: CRM), the market and technology leader in on-demand customer relationship management, today announced results for  its fiscal second quarter ended July 31, 2005.
 
“Customers are really responding to the power of the industry’s only complete on-demand  platform. From large enterprises to small companies, customers are taking CRM to new levels of success with our customizable on-demand service,” said Marc Benioff, chairman and CEO of  salesforce.com. “As we head into our third annual Dreamforce user and developer conference in September, our momentum continues to be very strong. It took us four years to reach our first hundred thousand subscribers, a year and a quarter to reach our second hundred thousand subscribers, and now only 3 quarters to reach our third hundred thousand subscribers.”
 
Salesforce.com delivered the following results for the second quarter of fiscal year 2006:
 
Revenue: Total revenue was $71.9 million, an increase of 77% on a year-over-year basis and an increase of 12% on a quarter-to-quarter basis. Subscription and support revenues were $65.6 million, an increase of 82% on a year-over-year basis and an increase of 13% on a quarter-to-quarter basis. Professional services and other revenues were $6.3 million, an  increase of 38% on a year-over-year basis and an increase of 5% on a quarter-to-quarter  basis.
 
Earnings per Share: Earnings per diluted share were $0.04, as compared to $0.01 per  share for the prior year period.
 
Net Income: Net income was $5.0 million, an increase of 331% on a year-over-year basis and an increase of 15% on a quarter-to-quarter basis. The second quarter effective tax rate was approximately 20% and average shares outstanding were 118.0 million.
 
Customers and Paying Subscribers: During the second quarter, the company added approximately 1,400 customers and approximately 41,000 paying subscribers. As of the end of the fiscal second quarter, the company had approximately 16,900 customers and approximately 308,000 paying subscribers.
 
Cash: Cash from operations for the fiscal second quarter was $14.1 million.   
 
Deferred Revenue: Deferred revenue as of July 31, 2005 was $117.3 million, an increase of 91% on a year-over-year basis and 12% on a quarter-to-quarter basis.
 
Salesforce.com is raising guidance for the fiscal year 2006, ending January 31, 2006, and initiating guidance for its fiscal third quarter 2006 based on information as of August 17, 2005:
 
FY06 Revenue: Expected to be in the range of approximately $298 million to approximately  $303 million.
 
FY06 Diluted EPS: Expected to be in the range of approximately $0.13 to approximately  $0.16, based on an estimated average of 120 million diluted shares outstanding and an estimated effective tax rate of 20%.
 
Salesforce.com is providing, for the first time, third quarter fiscal year 2006 guidance based on information as of August 17, 2005:
 
Q3 FY06 Revenue: Expected to be in the range of approximately $78 million to approximately $80 million.

Q3 FY06 Diluted EPS: Expected to be in the range of approximately $0.02 to approximately $0.04, based on an estimated average of 120 million diluted shares outstanding and an  estimated effective tax rate of 20%.
 
Quarterly Conference Call
Salesforce.com will host a conference call to discuss its second quarter results at 2:00 p.m. Pacific Daylight Time today. A live audio webcast of the conference call, together with detailed financial information, can be accessed through the company's Investor Relations Web site at http://www.salesforce.com/investor. In addition, an archive of the webcast can be accessed through the same link. Participants who choose to call in to the conference call can do so by dialing (913) 981-4901 or (800) 811-0667, passcode 1884741. A replay will be available until  midnight on August 31, 2005 and can be accessed by dialing, (719) 457-0820 or (888) 203-1112, passcode:  1884741.

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About salesforce.com
Salesforce.com is the market and technology leader in on-demand customer relationship management (CRM). Through its award-winning salesforce.com family of products including Salesforce (http://www.salesforce.com) and Supportforce (http://www.supportforce.com), the company provides a comprehensive suite of CRM applications to help enterprises of all sizes, industries and geographies meet the complex challenge of sharing and managing information ondemand. Salesforce and Supportforce are built on the Sforce client/service integration platform and include the Customforce tool for complete on-demand customization. Sforce (http://www.sforce.com) and Customforce (http://www.customforce.com) allow customers and independent software vendors to customize and integrate salesforce.com’s products, as well as build their own on-demand enterprise applications. As of July 31, 2005, salesforce.com manages customer information for approximately 16,900 customers and approximately 308,000 paying subscribers including Advanced Micro Devices (AMD), America Online (AOL), Automatic Data Processing (ADP), Avis/Budget Rent A Car (Cendant Rental Car Group), Dow Jones Newswires, Nokia, Polycom and SunTrust Banks. Any unreleased services or features referenced in this or other press releases or public statements are not currently available and may not be delivered on  time or at all. Customers who purchase our services should make their purchase decisions based upon features that are currently available. Salesforce.com has headquarters in San Francisco, with offices in Europe and Asia, and trades on the New York Stock Exchange under  the ticker symbol "CRM". For more information please visit http://www.salesforce.com, or call 1800-NO-SOFTWARE.
 
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“Safe harbor” statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements about expected revenue and earnings for the third fiscal quarter of 2006 and the full fiscal year 2006, the achievement of which involves risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions proves incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make.
 
The risks and uncertainties referred to above include - but are not limited to - risks associated  with possible fluctuations in our operating results and rate of growth, errors, interruptions or  delays in our service or our Web hosting, our new business model, our history of operating  losses, the possibility that we will not remain profitable, breach of our security measures, the emerging market in which we operate, our relatively limited operating history, our ability to hire,  retain and motivate our employees and manage our growth, competition, our ability to continue to  release and gain customer acceptance of new and improved versions of our service, successful  customer deployment and utilization of our services, unanticipated changes in our effective tax  rate, fluctuations in the number of shares outstanding, foreign currency exchange rates and interest rates.
 
Further information on these and other factors that could affect our financial results is included in the reports on Form 10-Q and 8-K and in other filings we make with the Securities and Exchange Commission from time to time, including our Form 10-Q for the period ended April 30, 2005 and our Form10-K for the fiscal year ended January 31, 2005. These documents are available on the SEC Filings section of the Investor Information section of our website at www.salesforce.com/investor.
 
Salesforce.com, inc. assumes no obligation and does not intend to update these forward-looking statements, except as required by law. Salesforce.com is a registered trademark of, and Sforce, Customforce.com and Supportforce.com are trademarks of, salesforce.com, Inc., San Francisco, California. Other names used may be trademarks of their respective owners.