First Ever Software as a Service Company to Exceed $1 Billion Annual Revenue Run Rate

- Record Revenue of $263 Million, up 49% Year-Over-Year

- Operating Cash Flow of $53 Million, up 53% Year-Over-Year

- GAAP EPS of $0.08, up 167% Year-Over-Year

- Record 4,100 New Customer Additions; Total Customers Now 47,700

- Total Cash and Marketable Securities Increases $326 Million Year-Over-Year to $823 Million

- Company Announces Strategic Acquisition of InStranet, Inc. to Accelerate Growth in Salesforce CRM Customer Service and Support

- Company Raises FY09 Revenue Guidance to $1.070 - $1.075 Billion

SAN FRANCISCO, Aug. 20 /PRNewswire-FirstCall/ -- Salesforce.com (NYSE: CRM), the market and technology leader in Software as a Service (SaaS) and Platform as a Service (PaaS), today announced results for its fiscal second quarter ended July 31, 2008.

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'By becoming the first ever Software as a Service company to achieve an annualized revenue run rate of one billion dollars, our second quarter performance is a milestone for salesforce.com, and for the cloud computing industry, ' said Marc Benioff, Chairman and CEO. 'Our largest customers are increasingly becoming the best examples of what is possible using the power of our growing portfolio of Software as a Service applications and our emerging Platform as a Service.'

Salesforce.com delivered the following results for its second quarter fiscal year 2009:

Revenue: Total Q2 revenue was $263.1 million, an increase of 49% on a year-over-year basis and an increase of 6% on a quarter-over-quarter basis. Subscription and support revenues were $239.7 million, an increase of 50% on a year-over-year basis and an increase of 6% on a quarter-over-quarter basis. Professional services and other revenues were $23.4 million, an increase of 41% on a year-over-year basis and an increase of 5% on a quarter-over-quarter basis.

Earnings per Share: Q2 GAAP diluted earnings per share were approximately $0.08, including approximately $19 million in stock based compensation and approximately $1.3 million in amortization of purchased intangibles related to previously announced acquisitions. For the basis of Q2 GAAP EPS calculations, there was an average of approximately 126 million diluted shares outstanding during the quarter.

Cash: Cash from operations for the fiscal second quarter was approximately $53 million, up 53% year-over-year, and seasonally down 37% from Q1. Total cash, cash equivalents and marketable securities finished the quarter at approximately $823 million, an increase of approximately $73 million from Q1 and up approximately $326 million from July 31, 2007.

Deferred Revenue: Deferred revenue was approximately $480 million as of July 31, 2008, an increase of 49% on a year-over-year basis and up 2% on a quarter-over-quarter basis.

Customers Additions: During the quarter net paying customers rose approximately 4,100, a company record, to approximately 47,700. Compared with the year ago quarter, net paying customers have grown by approximately 12,400.

InStranet Acquisition: Earlier today, salesforce.com announced the acquisition of InStranet, the leading provider of knowledge management technology for business to consumer call centers. The addition of this innovative technology will increase the momentum of Salesforce CRM Customer Service and Support in a growing market, which is currently estimated at $3.4 billion by Gartner (Gartner, Market Trends: CRM Software, Worldwide, 2007- 2012, March 31, 2008). Salesforce.com's acquisition of InStranet closed on August 4, 2008, for approximately $31.5 million, which includes the assumption of $4.2 million in cash on InStranet's balance sheet.

Guidance: As of August 20, 2008, salesforce.com is initiating guidance for its third quarter, fiscal year 2009. In addition, the company is updating its revenue and earnings per share guidance for its full fiscal year 2009.

Q3 FY09: Revenue for the company's third fiscal quarter is projected to be in the range of approximately $273 million to approximately $274 million. Excluding the effect of the InStranet acquisition, the company's EPS outlook is $0.08 to $0.09. Including the effect of the InStranet acquisition, estimated at $0.02 for the third quarter, the company is issuing guidance that its GAAP fully diluted EPS will be in the range of $0.06 to $0.07. The GAAP EPS estimate also includes the effects of stock based compensation and the amortization of purchased intangibles. For the third fiscal quarter, stock based compensation expense is expected to be approximately $20 million, and the expense associated with amortization of purchased intangibles, including that associated with the acquisition of InStranet, is expected to be approximately $2.0 million. For purposes of the Q3 GAAP fully diluted EPS calculation, the company is expecting an average diluted shares count of approximately 127 million shares, and a GAAP tax rate of 48%.

Fiscal FY09: The company is raising its full year revenue guidance it provided on May 21, 2008, with revenue now expected to be in the range of approximately $1.070 billion to approximately $1.075 billion. Excluding the effect of the InStranet acquisition the company's EPS outlook has improved to $0.34 to $0.35, from its prior guidance of $0.33 to $0.34. Including the effect of the InStranet acquisition, estimated at $0.05 for the full year, the company is updating its fiscal FY09 GAAP fully diluted EPS guidance to be in the range of $0.29 to $0.30. The GAAP EPS estimate includes the effects of stock based compensation and the amortization of purchased intangibles. For the full fiscal year 2009, stock based compensation expense is expected to be approximately $83 million, and the expense associated with the amortization of purchased intangibles, including that associated with InStranet, is currently expected to be approximately $6.6 million. For purposes of the fiscal year 2009 GAAP fully diluted EPS calculation, the company is expecting an average diluted share count of approximately 126 million shares, and a GAAP tax rate of 48%.

Quarterly Conference Call

Salesforce.com will host a conference call to discuss its second quarter fiscal 2009 results today at 2:00 p.m. Pacific Time. A live audio webcast of the conference call, together with detailed financial information, can be accessed through the company's Investor Relations Web site at http://www.salesforce.com/investor. In addition, an archive of the webcast can be accessed through the same link. Participants who choose to call in to the conference call can do so by dialing domestically 866-901-SFDC or 866-901-7332 and internationally 706-902-1764.