CRM platform provider salesforce.com, Inc. (CRM) recently announced that it will open two data centers in Canada, which will cater to international customers, thereby strengthening its presence in the country. The opening of data centers in Canada will help Salesforce to reach small and medium businesses in the country as well as meet the growing demand for cloud-based services.
Firms like Manulife Financial Corp and Bombardier Recreational Products (BRP) are using Salesforce’s best-in-class cloud, social and mobile solutions to enhance user satisfaction. The breadth of its offerings has helped Salesforce to expand its customer base and market share.
Salesforce’s investments in Canada come at the right time as a study by Gartner forecasts that the software market in the country is expected to increase 8.7% in 2014. Moreover the study also revealed that data center revenues will amount to $3.4 billion in 2014. We believe that the company’s entry into new markets like Canada would provide a significant opportunity to grow beyond U.K., France and Germany, which have already reached saturation.
Considering the increasing customer adoption of its products and satisfactory performances, market research firm Gartner acknowledged Salesforce as the leading social CRM solutions provider in Canada based on total software revenue in 2013 ($13.1 billion). We believe that the rapid adoption of Salesforce’ platforms demonstrates its growing opportunities in the ever-growing cloud computing segment.
Moreover, the data centers would enable the company to increase its international revenues, going forward. Notably, in first-quarter of fiscal 2015, Salesforce witnessed revenue growth of 39.0% in the Americas while revenues from Europe and Asia increased 42.0% and 21.0%, respectively, on a year-over-year basis.
We remain encouraged by the rising number of deal wins at Salesforce and the rapid adoption of the company’s cloud-based solutions. Overall, the company’s diverse cloud offerings and strong spending on digital marketing remain positives. Moreover, the company’s strategic acquisitions and the resultant synergies are expected to remain long-term positives.
Although, the company is growing reasonably in the cloud market, growth prospects have been rationalized by competition from International Business Machines (IBM), Oracle Corporation (ORCL) and SAP AG (SAP). Currency headwinds and an increase in investments could pose additional challenges.
Currently, Salesforce has a Zacks Rank #3 (Hold).
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