(B)(N) CRM Salesforce.com Incorporated

Drama. Salesforce is an evanescent dotcom product and software-as-a-service (SaaS) integrator with an impressive growth record from $10 in 2009 to the current $42 but is off our Charts since January, and might have to stay off as the Cloud  thickens with tough competition from IBM, Oracle, Google, and Microsoft, and software applications that are getting ever-better and easier to use (Reuters, May 23, 2013, Salesforce.com’s quarterly results disappoint Wall Street, and The Street, June 3, 2013, Salesforce Slumps on Meager Dot-Com Era Profits).

Despite a three-fold growth in sales from $1 billion to the current $3 billion, and a near four-fold growth in its total assets from $1.5 billion to the current $5.5 billion, the company has never paid us a dividend, and its net earnings have been negative for the last two years and very thin when positive at 4% to 5% of the gross revenue.

Investors, presumably, are supposed to “hump” their way up and down the P/E-curve in the old fashioned way, and make money by selling the stock to each other so that the last guy in pays everyone else – a kind of Ponzi-scheme one would think.

We’re not one of those, but we will play the game if the price is right; we only own the stock if the ambient stock prices summarized as the Red Line (SP) appear to be at or above the Black Line Risk Price (SF), and for no other reason. Please see Exhibit 1 and the References below.

Exhibit 1: (B)(N) CRM Salesforce.com Incorporated – Risk Price Chart

(B)(N) CRM Salesforce.com Incorporated

Salesforce.com Incorporated provides enterprise cloud computing solutions, offering social and mobile cloud apps and platform services, as well as professional services to facilitate the adoption of its solutions.

Please Click on the Chart to make it larger if required.)

From the Company: Salesforce.com Incorporated provides enterprise cloud computing solutions to businesses and industries worldwide. Its service offerings include Sales Cloud, which enables companies to grow their sales pipelines, close deals, improve sales productivity, and gain business insights; Service Cloud that enables companies to connect with their customers and address their service and support needs; Marketing Cloud for its customers to listen to conversations taking place on public social networks, such as Facebook, Twitter, and blogs; and Salesforce Platform, which enables its customers, independent software vendors, and third-party developers to develop applications in various programming languages, including Java and Ruby. The company also offers professional services, including consulting, deployment, and training services to its customers to facilitate the adoption of its social and mobile cloud solutions. Salesforce.com Incorporated sells and markets its services on subscription basis primarily through its direct sales force comprising telephone sales personnel, as well as through global consulting firms, systems integrators, and regional partners. The company was founded in 1999 and has 9,800 employees, and is headquartered in San Francisco, California.

The Price of Risk

The calculated Risk Price (SF) is a provably effective estimate of the “price of risk” which is “the least stock price at which the company is likeable” (Goetze 2009) and “likeability” is determined by the demonstrated factors of “risk aversion” – we want to keep our money and obtain a hopeful return above the rate of inflation – and the properties of portfolios of such stocks.

Stock prices that are less than the price of risk can be said to be “bargain prices” but with the risk attached that the company might never get a higher price other than that due to ambient volatility or “surprise”; on the other hand, investors who are willing to pay the “full price” above the price of risk, and buy and hold the stock at those prices, must also be confident, and have reason to believe, that the company will produce those values, absent new information.

Please see our Posts, The Price of Risk, August 2012 and The Nash Equilibrium & Its Stock Price, October 2012, for more information on the theory.

To see what else “risk averse” investing can do for us, please see our recent Posts, The Wall Street Put, April 2013, and earlier Posts such as The Dow Transports, March 2013, or The Risk Adjusted Dow, March 2013, or The Canada Pension Bond, February 2013, and for a more colorful description of investment risk and the application of the “price of risk” to mergers & acquisitions, please see our Post, Bystanders & Collateral Damage, April 2013.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond™
“Alpha-smart with 100% Capital Safety and 100% Liquidity”
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.