Business software maker Salesforce.com Inc on Tuesday reported a slowdown in new business ahead of its busiest quarter of the year, sending its shares down 4 percent after hours.
The company also reported quarterly profit that was in-line with Wall Street projections. Analysts said some investors found that disappointing after the stock had rallied 16 percent since the end of last month on hope earnings would be stronger. The Nasdaq Composite Index rose about 8 percent during the same period.
Meanwhile, Autodesk Inc shares fell more than 9 percent after the maker of design software for architects issued an outlook that missed Wall Street expectations.
Salesforce books revenue from its multi-year subscriptions quarter-by-quarter over the life of those contracts and Wall Street pays close attention to the as yet unused part, called deferred revenue, as an indication of future business.
The maker of Web-based software noted a decline in deferred revenue, which includes money already received but not yet booked as revenue, from the second quarter to the third quarter, ended Oct. 31.
That indicates the economy is not improving as much as investors hoped and the software maker's business is not poised to recover as quickly as projected, said Global Equities Research analyst Trip Chowdhry.
"Expectations were too high," Chowdhry added.
Still, investors were far more dour than Salesforce Chief Executive Marc Benioff, who painted a bullish picture of the business outlook in a conference call with analysts.
"We are getting our excitement back," he told analysts in the call.
He is now forecasting that new orders will be flat to slightly up in the current fiscal year, which ends Jan. 31. Three months ago he said he expected them to be flat to slightly down.
Benioff declined in an interview to say how he thinks the broader economy will fare.
"Do we know and do we understand the economy? I just don't think we do," he said.
San Francisco-based Salesforce hired 160 workers during the third quarter, bringing the payroll up to 3,800. Benioff said he plans to hire about 160 more this quarter.
Caris & Co analyst Curtis Shauger said that plan may not play well with investors concerned about the bottom line.
"Bringing new salespeople on board is one of the most dilutive things you can do. It impacts earnings in the short term, but it drives future growth," he said.
Benioff also said he planned to announce the company's fourth major product line at an annual user conference on Wednesday. He declined to say much about the internally developed product ahead of the announcement.
Third-quarter net income doubled to $21.4 million, or 16 cents per share, from $11.7 million, or 8 cents, a year earlier.
Revenue at the company whose rivals include Oracle Corp and SAP AG jumped 20 percent to $331 million, beating the average analyst estimate of $324 million.
Total deferred revenue fell to $545.4 million at the end of the third quarter from $549 million at the end of the second quarter.
Salesforce shares fell 4 percent to $63 in after-hours trading after falling 1.9 percent to close at $65.61 Tuesday on the New York Stock Exchange.
(Reporting by Jim Finkle; editing by Andre Grenon)
