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What's going on?
Salesforce.com, the cloud computing company that focuses primarily on software for customer relationship management (CRM), saw its stock rise 11% on Thursday after reporting financial results late on Wednesday that were better than most investors were expecting.
What does this mean?
Salesforces fourth-quarter sales rose 25% versus the same period one year ago, which is extremely high growth for a company that is already very large. It also said it expected sales this year to be better than it had previously expected. And investors, seemingly, like nothing more than a large company that still manages to grow at an impressive rate.
Why should I care?
For the stock: Salesforce spends a lot on marketing to generate that growth but no one seems to hold that against them. According to Bloomberg, for every $1 Salesforce makes in sales, it ploughs 49 cents back into marketing (by comparison, major competitor Oracle spends 20 cents). Salesforce remains a loss-making company. However, investors that are positive on the company argue that it continues to cement its position as a market leader (sort of how Facebook didnt make any money for years before it came to dominate social media).
The bigger picture: Tech has been having a rough time lately. LinkedIn saw its stock fall 44% in one day a few weeks ago. Tableau, a software company, had something similar happen to it when it reported disappointing results. The tech weakness has, reportedly, affected fundraising for startups. Salesforce is a reminder that truly transformational companies can continue to grow and see its stock price rewarded although it remains down more than 11% in 2016.
Originally posted as part of the Finimize daily email.
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