Why salesforce.com, inc. (CRM)’s Price Drop Makes No Sense

Microsoft Corporation (NASDAQ:MSFT)’s Dynamics CRM generates about $500 million annually; a pittance compared to its total revenue, but its integration with Office 365 could change that going forward. Like Microsoft Corporation (NASDAQ:MSFT), SAP AG (ADR) (NYSE:SAP) isn’t reliant on CRM revenue — it currently accounts for about 11% of total IFRS sales — and diversified business lines are rarely a bad thing. For both SAP AG (ADR) (NYSE:SAP) and Microsoft, revenue diversification gives them time to grow their respective solutions, while Salesforce is heavily reliant on its CRM suite to drive revenue. With that said, Salesforce deserves some credit; it became the No. 1 CRM provider as measured by revenue in 2012 according to Gartner Inc (NYSE:IT), replacing SAP.

From here
Given Salesforce’s $3 billion in cash and equivalents, improving operating cash flow and revenue, and its strong presence in the explosive cloud market, Salesforce is positioned well for future growth, just as it was prior to its recent earnings announcement.

About the only thing different about salesforce.com, inc. (NYSE:CRM) today compared to last week is its stock price. If Salesforce made sense at price-to-earnings multiples of 85 or 90 prior to its earnings announcement, then it still does. If you’re a growth investor, Salesforce was already a solid long-term opportunity. Now, it’s even better.

The article Why salesforce.com’s Price Drop Makes No Sense originally appeared on Fool.com and is written by Tim Brugger.

Fool contributor Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Salesforce. The Motley Fool owns shares of Microsoft.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.