salesforce.com, inc. (NYSE:CRM) has further flexed its muscle as the leading customer relationship management software with its $2.5 billion acquisition of ExactTarget, its largest acquisition in history.
salesforce.com, inc. (NYSE:CRM) helps companies better manage critical operations, such as sales force automation, customer service and support and marketing automation. After dominating the software as a service (SaaS) market for a number of years, this latest acquisition puts Salesforce.com in the human capital management market. The addition of ExactTarget to Salesforce.com’s portfolio is its latest push to boost its marketing department.
ExactTarget will propel salesforce.com, inc. (NYSE:CRM) into the email marketing business, where ExactTarget is a leading provider of social and mobile marketing capabilities. The acquisition is expected to increase total revenue by $120 to $125 million for the year.
salesforce.com, inc. (NYSE:CRM)’s CRM product is the second largest contributor to the overall SaaS enterprise application market, and this includes its first mover advantage. Salesforce.com’s move into the industry back in the early 2000s helped the company to capture a number of large customers. Gartner believes that the SaaS based CRM market could reach $7.9 billion in 2016, up from the $3.9 billion in 2011.
According to Gartner, salesforce.com, inc. (NYSE:CRM) ranks above major SaaS/cloud competitors, Oracle Corporation (NASDAQ:ORCL) and SAP AG (NYSE:SAP) in terms of “ability to execute and “completeness of vision.”
Going into the second quarter there were a total of 42 hedge funds long Salesforce.com, which includes Donald Chiboucis’ Columbus Circle Investors, with a $153 million (check out Columbus Circle’s top picks).
The big advantage for SAP AG (NYSE:SAP) is its leading position in enterprise resource planning (ERP). SAP leads the enterprise resource planning application market, with 35% market share of 35%, followed by Oracle Corporation (NASDAQ:ORCL) at 20%. Meanwhile, SAP also leads the market In customer relationship management software, with around 20% market share, ahead of Oracle and salesforce.com, inc. (NYSE:CRM).
salesforce.com, inc. (NYSE:CRM) trades at quite the outsized P/E, a forward P/E of 67. Its P/B multiple is also rich, at over 10 times, well above the 5.9 times industry average. However, with Salesforce.com’s dominant position in the CRM market and the impending increase in spending on enterprise software, the premium may well be justified. Salesforce.com has a five-year expected earnings growth rate of 40%, which is much higher than the peer group average of 18.7%.
Marshall Hargrave has no position in any stocks mentioned. The Motley Fool recommends salesforce.com, inc. (NYSE:CRM). The Motley Fool owns shares of Oracle Corporation (NASDAQ:ORCL).
The article Is This SaaS Company Just Too Expensive? originally appeared on Fool.com.
Marshall is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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