8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

August 19, 2004

Date of Report (Date of earliest event reported)

salesforce.com, inc.

(Exact name of registrant as specified in its charter)

Delaware	001-32224	94-3320693
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

The Landmark @ One Market, Suite 300, San Francisco CA 94105

(Address of principal executive offices, including zip code)

(415) 901-7000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report

Item 7. Financial Statements and Exhibits

(c) Exhibits.

99.1 Press Release issued by salesforce.com, inc. dated August 19, 2004

Item 12. Results of Operations and Financial Condition

On August 19, 2004, salesforce.com, inc. issued a press release announcing the results for its fiscal second quarter ended July 31, 2004. A copy of the press release is attached as Exhibit 99.1 to this current report on Form 8-K and is incorporated by reference herein.

The information in this current report on Form 8-K and the exhibits attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Registrant

salesforce.com, inc.

/s/ STEVE CAKEBREAD

Steve Cakebread

Chief Financial Officer

Date: August 19, 2004

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release issued by salesforce.com, inc. dated August 19, 2004

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE	Contacts:
	Joelle Fitzgerald
	salesforce.com
	Investor Relations
	415-536-6250
	jfitzgerald@salesforce.com
	Jane Hynes
	salesforce.com
	Public Relations
	415-901-5079
	jhynes@salesforce.com

Salesforce.com Delivers Strong Fiscal Second Quarter Results, Raises Guidance

Revenue Increases 88% to $40.6 Million; Net Income Increases to $1.2 Million

1,300 Customers and 21,000 Paying Subscribers Added in the Quarter

SAN FRANCISCO, Calif. – August 19, 2004 – Salesforce.com (NYSE: CRM), the market and technology leader in on demand customer relationship management, today announced results for its second fiscal quarter, ended July 31, 2004.

“We are delighted to have delivered strong results during a difficult period for the software industry,” said Marc Benioff, chairman and CEO of salesforce.com. “Our numbers speak for the growing acceptance of the on demand computing model.”

Salesforce.com delivered the following results for the second quarter of fiscal year 2005:

• Revenue: Total revenue was $40.6 million, an increase of 88 percent compared to $21.6 million for the same period last year. Subscription and support revenue was $36.0 million, an increase of 84 percent compared to $19.6 million for the same period last year. Professional services and other revenues were $4.6 million, an increase of 125 percent compared to $2.0 million for the same period last year.

• Net income: Net income was $1.2 million, an increase of 859 percent compared to $122,000 for the same period last year. Earnings per diluted share were $0.01 compared to break even for the same period last year.

• Cash: Cash from operations for the fiscal second quarter was $14.9 million compared to $4.0 million for the same period last year, an increase of 275 percent year over year. This cash increase is in addition to the $113.8 million received as proceeds from the company’s IPO.

• Deferred revenue: Deferred revenue for the fiscal second quarter was $61.6 million compared to $29.4 million as of the end of the second quarter of fiscal year 2004, an increase of 109 percent year over year. This compares to deferred revenue of $52.3 million as of the end of the previous quarter, or 18 percent growth sequentially.

• Customers and paying subscribers: During the second quarter, the company added over 1,300 customers and approximately 21,000 paying subscribers. As of the end of the second quarter, the company had approximately 11,100 customers and approximately 168,000 paying subscribers.

Salesforce.com is raising its guidance for the fiscal year 2005, ending January 31, 2005, based on information as of August 19, 2004:

• Fiscal year 2005 revenue is expected to be in the range of $165.0 million to $170.0 million.

• Fiscal year 2005 earnings per diluted share are expected to be in the range of $0.02 to $0.04 based on an estimated average of 110 million diluted shares and an effective tax rate of 13 percent.

Salesforce.com also expects revenue for its third quarter of fiscal year 2005 to be in the range of $43.0 million to $45.0 million.

Quarterly Conference Call

Salesforce.com will host a conference call to discuss second quarter results at 2:00 p.m. Pacific Daylight Time today. 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 until midnight on August 30, 2004. Participants who choose to call in to the conference call can do so by dialing (800) 310-6649 or (719) 457-2693. A replay will be available until midnight on August 23, 2004 and can be accessed by dialing (888) 203-1112 or (719) 457-0820, access code 365871.

About salesforce.com

Salesforce.com is the market and technology leader in on demand customer relationship management (CRM). Through its award-winning salesforce.com family of products, the company provides a comprehensive suite of CRM services to help enterprises of all size, industries and geographies meet the complex challenge of managing customer information. Salesforce.com also offers sforce, the salesforce.com client/service platform, to allow customers and independent software vendors to customize and integrate salesforce.com, as well as build their own on demand enterprise applications. As of July 31, 2004, salesforce.com manages customer information for approximately 11,100 customers and approximately 168,000 paying subscribers including Advanced Micro Devices (AMD), America Online (AOL), Automatic Data Processing (ADP), Avis/Budget Rent A Car (Cendant Rental Car Group), Dow Jones Newswires, Polycom and SunTrust Banks. Salesforce.com is headquartered in San Francisco, with offices in Europe and Asia, and trades on the New York Stock Exchange under the ticker symbol “CRM”. For more information please visit http://www.salesforce.com or call 1-800-NO-SOFTWARE.

# # #

Salesforce.com is a registered trademark of salesforce.com, inc., San Francisco, California. Other names used may be trademarks of their respective owners.

“Safe harbor” statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements about expected revenue and earnings that involve risks, uncertainties and assumptions. If any such uncertainties materialize or if any of the assumptions proves incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make.

The risks and uncertainties referred to above include - but are not limited to - risks associated with our new business model, our history of operating losses, possible fluctuations in our operating results and rate of growth, interruptions or delays in our Web hosting, breach of our security measures, the immature market in which we operate, our relatively limited operating history, our ability to expand, retain and motivate our employees and manage our growth, competition, new releases of our service and successful customer deployment and utilization and selling to larger enterprise customers. Further information on these and other factors that could affect our financial results is included in our registration statement on Form S-1 filed with the SEC on June 22, 2004 and in other filings with the Securities and Exchange Commission. These documents are available on the SEC Filings section of the Investor Information section of our website at www.salesforce.com/investor.

Salesforce.com, inc. assumes no obligation and does not intend to update these forward-looking statements, except as required by law.

salesforce.com, inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)

	Three Months Ended July 31,						Six Months Ended July 31,
	2004			2003			2004			2003
Revenues:
Subscription and support	$	36,017		$	19,592		$	67,133		$	36,514
Professional services and other		4,564			2,031			8,287			4,022
Total revenues		40,581			21,623			75,420			40,536
Cost of revenues (1):
Subscription and support		2,699			1,819			4,981			3,416
Professional services and other		5,483			2,009			9,564			3,767
Total cost of revenues		8,182			3,828			14,545			7,183
Gross profit		32,399			17,795			60,875			33,353
Operating expenses (1):
Research and development		2,074			1,685			4,201			2,925
Marketing and sales		22,525			12,205			42,940			22,861
General and administrative		6,635			3,771			12,208			7,416
Total operating expenses		31,234			17,661			59,349			33,202
Income from operations		1,165			134			1,526			151
Interest, net		348			85			491			154
Other income		5			(70	)		25			245
Income before provision for income taxes and minority interest		1,518			149			2,042			550
Provision for income taxes		202			22			272			71
Income before minority interest		1,316			127			1,770			479
Minority interest in consolidated joint venture		(146	)		(5	)		(163	)		11
Net income	$	1,170		$	122		$	1,607		$	490
Basic net income per share	$	0.02		$	—		$	0.03		$	0.02
Diluted net income per share	$	0.01		$	—		$	0.02		$	0.01
Shares used in computing basic net income per share		64,524			29,236			48,106			28,948
Shares used in computing diluted net income per share		107,749			91,973			104,079			91,785
(1) Amounts include stock-based expenses, as follows:
Cost of revenues	$	187		$	153		$	357		$	313
Research and development		80			124			169			244
Marketing and sales		408			521			822			1,035
General and administrative		425			246			629			536
Total stock-based expenses	$	1,100		$	1,044		$	1,977		$	2,128

salesforce.com, inc.

Condensed Consolidated Statements of Operations

As a percentage of total revenues:

(Unaudited)

	Three Months Ended July 31,				Six Months Ended July 31,
	2004		2003		2004		2003
Revenues:
Subscription and support	89	%	91	%	89	%	90	%
Professional services and other	11		9		11		10
Total revenues	100		100		100		100
Cost of revenues:
Subscription and support	6		8		6		9
Professional services and other	14		10		13		9
Total cost of revenues	20		18		19		18
Gross profit	80		82		81		82
Operating expenses:
Research and development	5		8		6		8
Marketing and sales	56		56		57		56
General and administrative	16		17		16		18
Total operating expenses	77		81		79		82
Income from operations	3		1		2		0
Interest, net	1		0		1		0
Other income	0		0		0		1
Income before provision for income taxes and minority interest	4		1		3		1
Provision for income taxes	(1	)	0		(1	)	0
Income before minority interest	3		1		2		1
Minority interest in consolidated joint venture	0		0		0		0
Net income	3	%	1	%	2	%	1	%
Stock-based expenses as a percentage of total revenues, as follows:
Cost of revenues	1	%	1	%	1	%	1	%
Research and development	0		1		0		0
Marketing and sales	1		2		1		3
General and administrative	1		1		1		1
Total stock-based expenses	3	%	5	%	3	%	5	%

salesforce.com, inc.

Condensed Consolidated Balance Sheets

(in thousands)

	July 31, 2004			January 31, 2004
	(unaudited)			(audited)
Assets
Current assets:
Cash and cash equivalents	$	61,093		$	10,463
Short-term marketable securities		55,057			25,349
Accounts receivable		29,944			26,536
Deferred commissions		7,374			8,266
Prepaid expenses and other current assets		3,500			3,532
Total current assets		156,968			74,146
Marketable securities, noncurrent		56,477			—
Restricted cash		3,158			3,912
Fixed assets, net		5,986			5,069
Deferred commissions, noncurrent		2,127			2,890
Other assets		1,797			1,494
Total assets	$	226,513		$	87,511
Liabilities, convertible preferred stock, and stockholders’ equity (deficit)
Current liabilities:
Accounts payable	$	1,947		$	2,035
Accrued expenses and other current liabilities		25,078			17,682
Income taxes payable		540			534
Deferred revenue		61,557			49,677
Current portion of capital lease obligations		558			78
Total current liabilities		89,680			70,006
Capital lease obligations, net of current portion		1,004			—
Long-term lease abandonment liability and other		1,689			1,830
Minority interest		953			775
Total liabilities		93,326			72,611
Convertible preferred stock		—			61,137
Stockholders’ equity (deficit):
Common stock		103			32
Additional paid-in capital		213,321			35,580
Deferred stock-based compensation		(8,087	)		(8,251	)
Notes receivables from stockholders		(1,723	)		(1,674	)
Accumulated other comprehensive (loss) income		(100	)		10
Accumulated deficit		(70,327	)		(71,934	)
Total stockholders’ equity (deficit)		133,187			(46,237	)
Total liabilities, convertible preferred stock and stockholders’ equity (deficit)	$	226,513		$	87,511

salesforce.com, inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Three Months Ended July 31,						Six Months Ended July 31,
	2004			2003			2004			2003
Operating activities:
Net income	$	1,170		$	122		$	1,607		$	490
Adjustments to reconcile net income to cash provided by operating activities:
Minority interest		146			5			163			(11	)
Depreciation and amortization		679			707			1,427			1,325
Amortization of deferred commissions		3,875			1,799			7,468			3,251
Expenses related to stock-based awards		1,100			1,044			1,977			2,128
Changes in assets and liabilities		7,965			309			8,952			1,564
Net cash provided by operating activities		14,935			3,986			21,594			8,747
Investing activities:
Restricted cash		760			(8	)		754			(27	)
Changes in marketable securities		(73,361	)		(2,256	)		(86,185	)		(10,350	)
Capital expenditures		(484	)		(488	)		(762	)		(819	)
Net cash used in investing activities		(73,085	)		(2,752	)		(86,193	)		(11,196	)
Financing activities:
Proceeds from the issuance of common stock, net of issuance costs		113,768			—			113,768			—
Proceeds from the exercise of stock options		92			114			1,734			175
Principal payments on capital lease obligations		(157	)		(159	)		(215	)		(310	)
Repurchase of unvested shares		(7	)		(11	)		(43	)		(16	)
Proceeds from subsidiary stock offerings		40			—			40			—
Net cash provided by (used in) financing activities		113,736			(56	)		115,284			(151	)
Effect of exchange rate changes		(53	)		11			(55	)		21
Net increase (decrease) in cash and cash equivalents		55,533			1,189			50,630			(2,579	)
Cash and cash equivalents, beginning of period		5,560			4,941			10,463			8,709
Cash and cash equivalents, end of period	$	61,093		$	6,130		$	61,093		$	6,130

salesforce.com, inc.

Additional Metrics

	July 31, 2004			April 30, 2004		January 31, 2004		July 31, 2003
Customer and subscriber data:
Approximate number of customers		11,100			9,800		8,700		7,000
Approximate number of paying subscriptions (1)		168,000			147,000		127,000		96,000
Full Time Equivalent Headcount		594			518		444		357
Financial data:
Cash, cash equivalents and marketable securities	$	172,627	(2)	$	43,733	$	35,812	$	23,780
Deferred revenue	$	61,557		$	52,340	$	49,677	$	29,449

	Three Months Ended July 31,						Six Months Ended July 31,
	2004			2003			2004			2003
	(unaudited)						(unaudited)
Revenues by geography:
Americas	$	32,506		$	17,909		$	60,842		$	33,955
Europe		5,828			2,692			10,460			4,730
Asia Pacific		2,247			1,022			4,118			1,851
	$	40,581		$	21,623		$	75,420		$	40,536
As a percentage of total revenues:
Revenues by geography:
Americas		80	%		83	%		81	%		84	%
Europe		14			12			14			12
Asia Pacific		6			5			5			4
		100	%		100	%		100	%		100	%

(1) Paying subscriptions are defined as unique user accounts, purchased by customers for use by their employees and other customer-authorized users that have not been suspended for non-payment and for which we are recognizing subscription revenue.

The July 31, 2004 paying subscriber metrics do not include the 20,000 subscriptions to a national professional organization since these subscriptions were priced at a nominal fee per subscription per month and provide limited rights to access and use certain features in the Company’s on-demand application service. The Company believes that excluding the 20,000 subscriptions provides a more accurate representation of its numbers.

Also, the July 31, 2004 number excludes approximately 2,000 paying subscribers who are using the Company’s service, but for which the Company has delayed revenue recognition until specific new technology is completed.

(2) Includes net proceeds of $113.8 million from the Company’s sale of common stock during its initial public offering in June 2004.