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Salesforce Reports Q1 as Deal Rumors Die Down

No one's buying.

Asa Mathat will report the results of its first fiscal quarter today just as chatter that it was the target of a takeover attempt have subsided.

Analysts are expecting Salesforce to report non-GAAP earnings of 14 cents on revenue of $1.5 billion, and to forecast earnings of 17 cents on $1.6 billion for the second quarter. But what Wall Street wants to hear is any commentary from CEO Marc Benioff on a potential sale. If he sticks to Salesforce’s standing policy of not commenting on “rumors and speculation,” then the conference call scheduled for later today will be an uneventful one.

Bloomberg reported on April 29 that Salesforce had hired unidentified bankers to field an offer expected from an unidentified suitor. Given its $45 billion market cap, attention quickly focused on three potential candidates: Microsoft, IBM and Oracle, with Google a potential but unlikely fourth and SAP also in the mix. Salesforce shares rose 10 percent on the report.

Even for the wealthiest of companies, acquiring Salesforce would be a huge undertaking. Since the initial report, the short list of potential buyers has ruled out a deal. Microsoft and Oracle have said they have no interest, while the CEO of SAP has said not once but twice that it wouldn’t be a buyer. (IBM has been suspiciously quiet on the subject.) In the three weeks since the rumors first hit, Salesforce shares have given back some, but notably not all, of their gains.

So what else will affect Salesforce’s results? Currencies. As a U.S.-based company that does a lot of business overseas — the government of Japan is one of its biggest customers — Salesforce takes a revenue hit when it gets paid in non-U.S. currencies because of the strong dollar. The company has already said it expects to absorb a hit on revenue of as much as $200 million in its fiscal 2016. Analyst Ross MacMillan of RBC Capital Markets said in a May 17 research note that the currency impact is expected to be most acute in the first and second quarters of the year. Additionally, currencies like the British pound, the euro and the Japanese yen have weakened further since Salesforce issued that guidance.

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