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Salesforce Falls on Weak Guidance After Q3 Results Beat Expectations

Still growing, but guidance misses analyst forecasts.


Cloud business software company reported third-quarter results that beat the expectations of analysts, but its shares fell by more than four percent in after-hours trading after its guidance came in weaker than expected.

Salesforce posted a profit of 14 cents a share on sales of $1.38 billion. That beat the forecast of analysts polled by Thomson Reuters, who expected earnings of 13 cents a share on revenue of $1.37 billion. Sales rose more than 28 percent over the year-ago period.

The sell-off seemed prompted by guidance from Salesforce for the fourth quarter and the coming fiscal year, both of which were at the low end of analysts’ forecasts. Salesforce said it expects revenue of between $1.436 billion and $1.441 billion and earnings of 13 to 14 cents per share in the quarter ending in January. Analysts had called for 15 cents on sales of $1.45 billion. For the 2016 fiscal year, starting in early 2015, it said it expects revenue of $6.45 billion to $6.5 billion, slightly below the consensus forecast of $6.6 billion.

In an interview with Re/code CEO Marc Benioff blamed the weaker outlook on currency effects. “The foreign exchange environment, particular with the Euro and the Japanese Yen is really difficult right now,” he said. “We’re trying to be proactive about our expectations. We’re saying what we expect about 16 months from now so we’re getting out ahead of it quite a bit.” The company expects a headwind from the effects of currency to affect results during fiscal 2016 by between $125 million and $150 million.

During the quarter unbilled revenue, a key indicator of services contracted but not yet delivered, rose 29 percent to $5.40 billion. The company exited the quarter with more than $1 billion in cash, restricted cash and short-term investments on its balance sheet.

Keith Block president and vice-chairman, said it was the strongest third quarter in the company’s history. “We completed more deals in the seven- and eight-figure range during the quarter than in any third quarter in the history of the company,” he said.

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