Monday, April 27, 2009

salesforce.com (NYSE:CRM): SMB survey highlights renewal pricing pressure; reiterate CL Sell - Goldman Sachs

Goldman Sachs is out with some negative comments on salesforce.com (NYSE:CRM) saying their latest survey of SMBs on SaaS deployments and salesforce.com in particular, suggests that the company is facing increasing headwinds on renewals and ASPs. Broadly, they remain bearish on the demand trends for applications. Firm reiterates their Sell rating, Conviction List membership, and $23 price target on the stock.

In Goldman's survey, 48% said they would negotiate their contracts down soon, up from 38% in December survey. Their updated survey also suggests that, on average, companies are reducing seat counts over the next year by about 1%, a 7% change from the 6% expected increase in seats seen in last survey.

Catalyst
Ongoing negative data points on application spending are likely to weigh on the shares going forward. SAP’s upcoming earnings report could provide some read-across to salesforce’s higher-end enterprise footprint. Firm expects SAP’s new license sales to be down 22% yoy, excluding the impact of currency, underscoring the difficult selling environment for enterprise applications. They also expect CRM’s 1Q report in May to highlight a continued slowing in the company’s bookings growth as new and renewal subscriptions are impacted by the ongoing global recession.

Notablecalls: A pullback maybe due for CRM in the n-t following this GSCO call. An excuse to sell, if you please.

1 comment:

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