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Salesforce Sinks on Profit That Falls Short of Estimates

Nico Grant

(Bloomberg) -- Salesforce.com Inc. gave a profit forecast that fell short of Wall Street’s estimates, signaling that the software maker’s big-ticket acquisition of Tableau and global expansion have spurred rising costs.

Earnings, excluding some items, will be 54 cents to 55 cents a share in the current quarter, short of analysts’ average estimate of 62 cents. Shares declined about 2% in extended trading.

Still, the expansion helped fuel company revenue growth. Sales gained 33% to $4.51 billion in the period ended Oct. 31, the San Francisco-based company said Tuesday in a statement. Analysts projected $4.46 billion. It was Salesforce’s first quarter of more than 30% year-over-year growth since July 2014.

Chief Executive Officers Marc Benioff and Keith Block have made acquisitions a key part of the customer-relations software company’s strategy to increase sales, highlighted by the purchase of Tableau Software Inc., which generated $1.15 billion in revenue last year making analytics tools. The company also has forged partnerships with major cloud vendors such as Microsoft Corp. and Amazon.com Inc. to make its software more ubiquitous.

Shares declined to a low of $156.25 in extended trading after closing at $161.57 in New York. The stock has climbed 18% this year.

Profit, excluding some items, was 75 cents a share in the fiscal third quarter. Analysts, on average, projected 66 cents. Expenses were up 37% to $3.31 billion. The company held its annual user conference, Dreamforce, in November. Salesforce calls the event the world’s largest software conference, with 171,000 registered attendees this year.

The company’s full-time workforce increased almost 39% from a year earlier to 47,677 as of Oct. 31, Salesforce said.

Revenue from Sales Cloud, the company’s flagship product, grew about 15% to $1.17 billion in the quarter. The company leads the market for sales-tracking software, but growth rates have slowed down, prompting Salesforce to expand in other areas.

Service Cloud sales increased 24% to $1.14 billion. The software maker offers this tool so companies can communicate with field employees and customers, a space where it faces increased competition from ServiceNow Inc. and others.

(Updates with expenses in the sixth paragraph.)

To contact the reporter on this story: Nico Grant in San Francisco at ngrant20@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Andrew Pollack, Molly Schuetz

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