Salesforce quarterly figures prove cloud industry resistant to IT downturn

posted in: Cloud/SAAS | 0

Written by Business Cloud News

Salesforce’s latest quarterly figures have reversed the conventional logic of valuing cloud company stock, according to stock markets reaction.

Before the cloud giant’s latest figures were released, many Wall Street analysts were looking for signs of a downturn in the cloud industry, according to Reuters, which reported that the cloud software leaders is regarded as a barometer for conditions across the cloud industry. After a poor sales outlook from Tableau earlier this month, many analysts were looking for proof of a downturn in the cloud industry. Conventional wisdom in the money markets was that poor cloud performance would follow a downturn in the IT industry, related to worries about the economy.

However, when Salesforce returned higher better than expected revenue reports in its quarterly review and raised its yearly revenue forecast, analysts began to speculate that cloud sales and IT investment may be inversely related. At the end of the first day’s trading after Salesforce’s figures were released its stock has risen 7.2%, reported Reuters.

The cloud giant company upped its revenue forecast for the year from $8.0 billon-$8.1 billion to $8.08 billion-$8.12 billion. Analysts on average were expecting a profit of 99 cents per share on revenue of $8.08 billion.

Salesforce’s Chief Financial Officer Mark Hawkins dismissed the pessimistic outlook the money markets have for the cloud industry in the current uncertain economy. “We aren’t seeing an economic impact,” said Hawkins.

The opposite of analysts’ expectations is taking place, he argued, since the cloud computing sector thrives when businesses make more careful buying decision and choose cheaper, simpler to install services that can be costed more flexibly. Another point of departure between cloud and IT company stocks is that they are bought by different people. Salesforce is often installed over the head of the IT department, Hawkins said.

In January BCN reported how BT has effectively become a reseller channel for Salesforce, giving its corporate customers the option of a hotline to Salesforce’s cloud service through its BT Cloud Connect service.