When and how will Salesforce.com start to make money?
This is the key question that investors need to ask themselves.
The line of Marc Benioff is : "It's all about the topline, not the bottomline. Let's grab marketshare before the pie has been taken by others."
This strategy tacidly assumes two things:
1) Once we have the biggest piece of the pie, nobody can take it away from us.
2) Once we have the biggest piece of the pie, we can start making money.
Both assumptions are wrong in my opinion. Salesforce.com is trying to grab marketshare at the cost of profitability. It invests heavily in sales and marketing to the extent that these costs are bigger than the gross profit. Moreover it is paying its key executives with stockbased compensation. This is not only dilutive for the shareholder, but it is less attractive for employees when the stockprice starts to fall. Why would you want stock instead of salary if the stock is worth less?
With a current valuation of 10 times the sales at negative EPS, having the thinnest (in fact negative) operating margins in its industry, the odds are that the stockprice will sooner or later collapse, taking away the incentive of stockbased compensation, forcing the company to compensate with real salary costs, increasing its costs further, jeopardizing its (non)profitability even more .
As to assumption 1, Salesforce.com has little barriers to competition from its many competitors, some of them much bigger, well funded PROFITABLE companies like Microsoft, Oracle , IBM, Google and SAP. It's just a fairy tale that these mastodonts would not be able to take away the pie from Salesforce.com once they decide it is serious business (which they appear to have done).
We have seen this many many times before. Compaq/HP and Dell taking over the lead from IBM in PC's. Microsoft word blasting away Wordperfect, Microsoft explorer crushing Netscape, Apple blowing away Nokia and Blackberry.
Facebook is under pressure because it has such a high PE (of 100) and price/sales ratio. Salesforce.com does not even have a PE! When they will have one, if ever, the PE will start between 5000 and 10000. If you want to talk about hyperbolic PE's dwarfing the one of Facebook, look no further. Just two weeks ago we saw that that Saleforce.com can drop from 157 to 133 in just a week (from 150 to 135 in one day). Because of one bit of negative news. It is now at 150 again. From 133 to 150 roughly means 2 billion in market cap. That's real money, about the entire yearly revenue, that investors are throwing into a company that is not even making real money for them. As long as this hypercraze continues, the stock could well rise more, but sooner or later the awakening will come, and the stock will collapse suddenly and with more force than many anticipate.
I just realized that Graham Smith used to work as CFO and lived on the Isle of Man:
The Trevia company he was CFO for I think was also a fraud. In general, I think Isle of Man may be a hot bed for fraud:
Trevia is now pink sheets listed and worth nothing. I am looking into the Trevia people but I think it may have been a fraud.
Thanks. Please post about what you find. I just re-started part of my CRM put for less than I sold it about an hour ago. It's a smaller position than the former one in case a t.v. pump has any effect. It's not a weekly put, but I might decide to buy weeklies tomorrow.
Sent: dinsdag 29 mei 2012 20:05
To: Wim Dankbaar
Subject: Another Graham Smith Company
This one looks overpriced.
Was looking into that venture capital firm (Geneva Capital) that underwrote CRM's issue (u know the one that also is a search recruiting firm).... I am trying to figure out if this company :
the Geneva Group and Nicholas Garcia from Orange County is related to the Geneva Group that was the group that brought CRM public .... which is based in San Fran. http://www.genevagroup.com/igor.htm
Cannot find a connection but Geneva Group w/ Igor Sill says on the site they have been around since the 1980's, so it could make sense.
Geneva group with Nicholas Garcia was taken down by SEC in the 1990's:
Tanna C. Kelly of Geneva Group:
I just checked the futures. In my head I knew to expect the Monday close to be higher than the Tuesday morning quotes, but it was easy to imagine manipulation to try to avoid an outside reversal month. Oh well, the futures on the downside now could be closer to unchanged by 9:30 a.m.. If the AMZN 215 weeklies (which are the strike price I held, too) are much higher than where I sold them, I may not be able to get myself to press the button to buy weekly puts.
I'll get it again tomorrow. Actually I shorted the weeklies near the morning top and closed it out when CRM was under 213. I closed out at a better price than I would have had later. My position was too small, but I'd done that because I thought the market bounce might take AMZN up more before it went down. Hopefully I'll get a good entry point tomorrow. If on Tuesday, the DJIA appears that it won't close up enough to finish the month up about the 200 points needed to avoid having an "outside" May, then I'll be more confident about a sizable AMZN move down from here. I haven't checked Wednesday's futures yet because I just got back to my computer (though what they are by the time the U.S. market opens depends more on U.S. pre-market moves.
If you have weekly AMZN puts, I wish you well with them. I'll probably re-enter the puts tomorrow.
Foxy, you closed out the Amzn weekly's for this week. Really ? Come on and get back in there. I want to see you profit tremendously. You should know that by now. Current Amzn price $213.05. Target price by week's end (based on charts) - $195-$199. If it "only" falls to $202, oh well, still well over a 100% gain on any near/in money weekly put. I'm in the $215s (paid $4.15).
I may have been too cautious about when CRM will go down below 146. Obviously, it's under 146 now. Even closing at 146 instead of closing under 146 would be a victory for bears on CRM, in view of all the pumping attempts.
When I sold insurance (Northwestern Mutual Life) many years ago, I studied for (and achieved ) the ChFC designation, the insurance company form of the CFP. The general principles taught have nothing to do with making money. It's just the assumption that by allocating money and ignoring it for many years, the investor will profit. The problem with that is leaders and laggards change. Leaving the allocation of funds to fund managers has made money over decades where the markets have trended up. When fund holders see increases in their bottom line, they believe in letting the fund managers take care of the details. What will fund holders see when they receive May statements in June? What are retail investors now seeing when (even if they didn't buy FB) FB has fallen so far from the IPO price that was supposed to be a bargain for favored brokerage clients.
We passed on the FB IPO (and my husband doesn't short in the account he manages, but has stayed away from tech and retail)and passing on that and so many other IPO's and follow-ons. When pestered again to buy the IPO, getting the repeat contact was more signal to stay away. (I won't short it either.)
That's a sign of caution in other tech stocks, IMHO. After that we were given the "opportunity" to buy the follow-on offer for BLK. That gives me the caution sign for BLK, though I haven't shorted it and may not. The big lesson came when we turned down the GM IPO and haven't even bought it on the dips.
CRM has trapped longs and some have very large positions. Is it possible that there will be more selling of parts of large positions by managers who can see how much trouble CRM is having in reclaiming 150. Because of that, CRM is unlikely to reach 150 again, despite any pumps and target increases. Within a few days, CRM could be unlikely to get anywhere above 148 or 147 or even 146. The 200 day MA is the pull on the downside at this point, IMHO.
Stocks Rise Even as Spain Starts to Follow the Greek Script
YEP, it is crazy. But when craziness rules, the markets (and especially the bubbles) are on their way to fall hard. REAL HARD!
Folks, I don't want to scare you, but I do want you to realize that this stock could crumble in half in a matter of days or weeks.
If you read this, do not complain at the end of the year, you had not been warned.
Disclosure: I am 23,000 shares short, shorting more above 150.
In case you do believe I cannot recognize scams, check out my website www.jfkmurdersolved.com.
Do you believe Lee Harvey Oswald killed JFK? Then keep buying Salesfarce.com!