Daily Management Review

Coronavirus Pandemic Forces Salesforce To Slash Annual Sales Estimates


Coronavirus Pandemic Forces Salesforce To Slash Annual Sales Estimates
The coronavirus pandemic prompted the cloud-based business software maker Salesforce.com Inc to allow clients to defer payments and provided one time commissions to its sales team – all of which forced the company to slash its forecasts for revenue and profit for the entire year.
The share price of the company dropped by 3 per cent in choppy extended trading even as investors seemingly overlooked the revenues of the company or the first quarter which besat estimates.
The company’s Chief Executive Officer Marc Benioff said on an earnings call that most of the expenses were recorded in the first quarter which included about $140 million in sales commissions to its sales team.
Salesforce was able to sign more deals during the quarter because of companies all around the world implementing processes to allow its workers to work from home because of the stay at home and social distancing orders due to the coronavirus pandemic, Benioff said.
“I’ve been on more sales calls with more CEOs in the last two months than at any time in my career,” Benioff said.
Last year the company spent more than $16 billion in acquisitions as it sought to beefed up its cloud business through this process as well as to address the issue of growing competition from rivals such as Oracle Corp and German competitor SAP.
The company now has forecast an annual revenue for the current fiscal year ending in 20201 of about $20 billion compared to its previous forecast of a range of between $21 billion and $21.1 billion.  The company also expects to make annual adjusted profit of between $2.93 and $2.95 per share which was also slashed compared ot its previous projection of between $3.16 and $3.18 a share.
The company’s Chief Financial Officer Mark Hawkins said that the latest forecast of the company is based on the assumption that by next year, the growth in spending in IT will normalize according to the experience from the Great Financial crisis.
For the first quarter ended April 30, he net revenue of the company increased by 30 per cent to $4.87 billion, which was a little higher than the average analyst estimate of $4.85 billion.