Salesforce Attracts Big Rivals as Strategy Delivers

Even before Salesforce.com Inc. (CRM) went public in 2004, Chief Executive Officer Marc Benioff wasted few opportunities to poke fun at bigger, more established software companies, calling their products “landfill.”

In his management book “Behind the Cloud,” Benioff advised upstarts to “box above your weight.”

Now, Oracle Corp. (ORCL), SAP AG (SAP) and Microsoft Corp. (MSFT) are punching back, buying companies that offer business-management tools over the Internet, gaining traction in an area pioneered by Salesforce.

That’s stepping up pressure on Benioff to move beyonrd his core -- programs that manage sales -- and accelerate a push into software-development and social-media marketing, part of a bigger market valued by UBS AG at more than $100 billion.

Salesforce is facing pressure to expand into new markets.

When he started Salesforce, Benioff bet that wider use of the Internet would help enterprises stop buying servers and software and installing them in-house. The bet paid off, as companies look to use online services -- now called cloud computing -- to cut costs and streamline operations.

Salesforce now faces greater competition as Microsoft, Oracle and SAP have all made recent moves to become more broadly competitive against Salesforce.

For Rent

Concern over accelerating competition has diminished Salesforce’s value. The company’s enterprise value -- which accounts for its debt and market capitalization -- will fall to 5.85 times sales in the current fiscal year, versus its yearly average of 7.72 since 2005, data compiled by Bloomberg show. On the same basis, Oracle’s value has held up better amid an acquisition spree, with a ratio of 3.56 for its current year, compared with an average of 4.64.

Salesforce’s revenue growth may taper this year and next, from the 37 percent rate in the fiscal year that ended Jan. 31. The rally that lifted Salesforce’s stock 64 percent through April 19 from a low on Jan. 4 has since fizzled. The shares have declined 15 percent since that peak.

Benioff for years has beaten the drum for corporate software delivered as an online service as a more efficient way for companies to run sales, marketing and customer support. Instead of paying multimillion-dollar licensing fees up front, SAAS allows customers to rent applications by the month via a Web browser, with Salesforce handling updates.

Tough Rivals

Recently Oracle, SAP and Microsoft have all made moves that validate what Salesforce.com has been delivering to companies over the past decade.

Benioff, who recently joined the board of Cisco Systems Inc. (CSCO), spent 13 years at Oracle before starting Salesforce in 1999 with the blessing of Oracle CEO Larry Ellison, who also invested $2 million in the venture.
A decade later, Ellison, speaking at a posh Silicon Valley hotel three summers ago, lambasted Salesforce, accusing the software maker of repackaging decades-old technology. Cloud computing, Ellison ranted, was “nonsense.”

“All it is, is a computer attached to a network.” Of Salesforce, Ellison added, “They change a term and they think they’ve invented technology.”

These days, Ellison has embraced cloud computing, buying companies and starting his own online computing service to deliver Oracle’s business applications and database software.

Gathering Clouds

Oracle, based in Redwood City, California, says it’s already booked $1 billion from cloud computing, as well as online human resources and customer support companies it acquired in the past year. Customers include Yahoo! Inc. (YHOO), Starbucks Corp. (SBUX) and Hyatt Hotels Corp. (H)

Beyond the $13 billion customer relationship management software segment, UBS analyst Brent Thill estimates the broader platform software market, which includes databases and development tools, to be worth $101 billion.
“We’re the second biggest software-as-a-service provider today and to be honest with you, we just got started,” Oracle co-President Mark Hurd said in a recent interview.

Oracle also plans to add accounting, supply chain management, and manufacturing planning to its online offerings.

Dream Deals

SAP, the world’s largest maker of business management applications, reported better-than-estimated earnings thanks to its SuccessFactors online HR software. Redmond, Washington-based Microsoft, a perennial Benioff target, last month bought Yammer Inc., a Facebook-like corporate networking tool that competes with Salesforce’s Chatter.

To contend with the newfound competition, Salesforce is expanding into human resources and tools for marketing on Facebook and Twitter. At its annual Dreamforce conference on Sept. 18 in San Francisco, where Salesforce is based, the company plans to detail its new human resources offering. Benioff will unveil Work.com, which will let managers set organizational goals and recognize employees.

One of Salesforce's  customers DuPont has been acquiring companies through structured M&As and making a lot of acquisitions that give them new capabilities.  said DuPont Co. DuPont has standardized on three vendors -- SAP, Salesforce and Microsoft -- and expects each to deliver technology it can rent on a monthly basis.

Star Hire

Salesforce can hit $10 billion in sales given its pace of growth, though no target dates have been set. Analysts expect Salesforce to reach $10.8 billion in annual sales by 2020, according to estimates.

Salesforce has begun to lean on the expertise of a Silicon Valley engineering executive who joined Salesforce last year after spending 12 years at Oracle and almost three at SAP.

The challenge at Salesforce is that the company grew out of selling primarily to small and medium-sized businesses, not necessarily large enterprises.

The newest senior developer at Salesforce are determined to establish credibility after presiding over the years-late Fusion suite at Oracle, then departing SAP after less than three years.

Social Element

Salesforce and Oracle are also dueling to take advantage of growing corporate demand for marketers to create campaigns and garner product feedback from Facebook and Twitter users’ streams of posts.

Oracle bought closely held Involver Inc. following deals for Vitrue Inc. and Collective Intellect Inc. in the past three months. Google Inc. (GOOG) recently said it would buy Wildfire Interactive Inc. for about $250 million to let ad clients design social media marketing campaigns.

The acquisitions echo Salesforce’s $745 million latest deal for social marketing company Buddy Media Inc.

Oracle and Salesforce are buying social media ad delivery companies because they see a lot of activity, and the growth rates are very high.

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Motorola & Microsoft Battle Over Patents

Story first appeared on SlashGear.com

Everything seems to be revolving around patents in the tech space these days. When companies aren’t acquiring them for large amounts of cash, they’re suing others for alleged infringement. Motorola claims that Microsoft fell foul of patent infringement thanks to the use of H.264 in Windows and on the Xbox 360, and a judge last night ruled in favor of Motorola on the issue.  A San Diego Patents Lawyer has been following the case.

The Xbox 360 was found to infringe on four of Motorola’s patents by a judge at the US International Trade Commission. The patents cover the use of H.264 encoding, an industry standard, so it doesn’t come as much surprise, but it’s a win for Motorola nonetheless. Microsoft tried to argue that Motorola was abusing its H.264 patents, and that they could “kill video on the web”, but the judge wasn’t swayed.

Microsoft responded to the ruling in a statement, saying it remains confident the Commission will ultimately rule in Microsoft’s favor in this case and that Motorola will be held to its promise to make its standard essential patents available on fair and reasonable terms.  Motorola has requested as much as $4 billion per year for the use of H.264 on the Xbox 360 console, which Microsoft believes to be extortion.


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Facebook Beefs Up Intellectual Property Portfolio

Story first appeared on CNET.com

When a company with nearly limitless resources shows itself ready to spend whatever is necessary to beef up its intellectual property portfolio, patent challengers have added incentive to seek out easier fights elsewhere.

So it is that Facebook is again putting its very deep pockets to work, adding a new clutch of patents from Microsoft to an earlier trove it acquired from IBM. The message to Yahoo and beyond is clear: Do you want to get into a spending war with a company whose deep pockets are about to get a lot deeper? In other words, there's a lot more where that came from.

All this marks a rapid turnaround for Facebook. The announcement earlier today that Facebook would spend $550 million to buy patents held by Microsoft was the second big patent purchase by the social networking company in as many months.

At the end of 2011, only 56 US patents But the company received the proverbial wake-up call when Yahoo sued the company, claiming that Facebook infringed upon several of its patents. Rejecting the allegations, Facebook has since counter sued.

Then in March, Facebook acquired around 750 patents held by IBM covering software and networking for an undisclosed sum. And now this agreement to purchase a portion of the patent portfolio Microsoft recently agreed to acquire from AOL. As of today, the company is estimated to have 775 granted U.S. patents and approximately 100 pending US applications, according to a managing director and chief intellectual property officer at MDB Capital Group LLC.

Facebook is starting to focus on IP in a big way, state San Diego Intellectual Property Lawyers.

For the record, Facebook isn't saying anything beyond its official press release announcing the deal with Microsoft. But insiders acknowledge the obvious motivation: Facebook's working quickly to bulk up its intellectual property portfolio in advance of its initial public offering, taking another preemptive move to dissuade any patent trolls thinking about filing a Yahoo-like lawsuit out of the blue.

All told, Facebook likely spent nearly $1 billion on IP acquisitions to fundamentally address its issues with Yahoo, which remain unresolved.

The first acquisition (from IBM) appears to be encumbered - meaning that real leverage won't come until existing licenses to Yahoo expire. This portfolio is presumed to have not been licensed to Yahoo, and so would have more immediate value in settlement negotiations.

One side issue to come out of today's news: Microsoft's now risks getting involved in that Facebook-Yahoo snit. In October 2007, Microsoft paid $240 million in return for approximately 1.6 percent of Facebook. As part of that deal, which broadened an earlier marketing arrangement, Microsoft would help sell Internet ads for Facebook. At the time, the Facebook arrangement was seen as a way for Microsoft to counter Google's increasing clout in the online advertising market.


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Microsoft Replaces Chinese Chief Exec

Story first appeared in The Wall Street Journal.

Microsoft Corp. reorganized its leadership in China, as the company continues to contend with software piracy in world's largest personal-computer market and regulations barring sales of its Xbox 360 game console.

The Redmond, Wash., company said Friday that its Greater China chief executive, will be succeeded by the current area vice president for Microsoft Germany. It also said that the Greater China Chief Operating Officer will be switching positions with the managing director of Microsoft U.K.

Microsoft said in a written response to questions that its Greater China chief executive "decided to leave Microsoft for personal and family reasons," adding that the company's Greater China business has "experienced dramatic growth in the past four years under the strong leadership. He will depart at the end of April but remain in an advisory role, the company said.

Microsoft has reached a key milestone in their ambitious growth plans for the Greater China region and it is a good time for new leaders to take these plans to the next level.

Piracy has been a problem for Microsoft since it entered China about 20 years ago. In the past, people familiar with the matter have said piracy has been a cause for disagreements on performance expectations within the company's ranks. It was unclear Friday whether that was still the case.

In an address to employees in the company's Beijing office last spring, the Chief Executive said Microsoft's revenue per personal computer sold in China was only about one-sixth of the amount it gets in India, and that the company's total revenue from China—with a population of 1.3 billion—is less than what it gets in the Netherlands, a country with fewer than 17 million people.

At the time that the expected revenue from China—which Microsoft doesn't disclose—to be only 5% of the company's revenue in the U.S. in 2011. China surpassed the U.S. to become the world's largest PC market by number of shipments last year.

Microsoft's profits from China were growing, thanks in part to government crackdowns on intellectual-property theft and initiatives to make state-owned enterprises buy authorized software. On Thursday, the Greater China chief executive spoke at a roundtable about intellectual property hosted by the U.S. Ambassador to China, praising the government's efforts to improve intellectual-property-rights protection and saying he was "more optimistic than ever before about the Chinese market."

In its efforts to combat the piracy problem, Microsoft has maintained a close relationship with Chinese authorities, made deals with PC makers to have its software pre-installed on more computers, and even dropped its prices for its Microsoft Office software to encourage buyers to opt for authorized software.

The Greater China chief executive was also in talks with Chinese officials about restrictions on the sale of game consoles. In 2004, a group of government agencies issued a regulation to limit the influence of videogames and arcades on children, and it has had the effect of preventing Microsoft from officially selling its popular Xbox console in China, the company said.

The new appointments are a deviation for Microsoft in that both have worked in the company for years but not as managers in the Greater China region, which includes Taiwan and Hong Kong. Its last two top executives, who were brought in from Motorola Inc., had prior experience in the region.

Microsoft said in its statement that the new appointment is a "seven-year veteran of Microsoft" who "delivered excellent and sustainable results in growth and profitability," including in a previous position as head of the company's Europe, Middle East and Africa division.


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Soldier Steals Identity of Microsoft Co-founder

Story first appeared in the Detroit Free Press.

An AWOL soldier from Pittsburgh is charged with bank fraud for allegedly stealing the identity of one of the world's richest men: a Microsoft co-founder.

A federal criminal complaint unsealed Monday says the 28-year-old soldier called Citibank in January and changed the address on the account in question from Seattle to one in Pittsburgh, then had a new debit card sent to him at that address.

Investigators say he used the card to attempt $15,000 in transactions, including paying on a delinquent Armed Forces Bank account and making purchases at a video game store before his March 2 arrest.

A detention order says he will be detained until April 2 unless the Army takes him into custody.

An email to his public defender wasn't immediately returned today.

WPXI-TV first reported the arrest.

Adobe Shares Surge on Report of Microsoft's Interest in Merger

Bloomberg

 

Adobe Systems Inc. shares surged as much as 17 percent, triggering exchange circuit breakers meant to curb volatility, on a report that Microsoft Corp. Chief Executive Officer Steve Ballmer discussed buying the company.

The New York Times reported that Ballmer recently visited Adobe CEO Shantanu Narayen at Adobe’s offices in San Francisco. The discussion centered on Apple Inc.’s control of the mobile- phone market and how the two companies could work together to compete, the Times said. A possible acquisition of Adobe by Microsoft was among the options discussed, according to the newspaper.

Adobe rose $2.96, or 12 percent, to $28.69 at 4 p.m. on the Nasdaq Stock Market. Earlier in the session, the shares jumped as high as $30, triggering the circuit breaker halt for five minutes. The stock has declined 22 percent this year.

Adobe has clashed with Apple CEO Steve Jobs, who banned Adobe’s flash video software from Apple’s mobile devices. Adobe won a partial victory on Sept. 9, when Apple eased restrictions on creating applications for its iPhone and iPad devices. Apple had prevented developers from using Adobe’s Flash video software.

Rival Standard

Still, the change didn’t let Flash apps run inside the browser on Apple devices, and that’s a larger concern, Jeff Gaggin, an analyst at Avian Securities Inc. in New York, said last month. Apple, which dominates the market for mobile apps, is promoting an Internet standard called HTML5 instead.

At the meeting, which included a “small entourage of deputies,” Ballmer and Adobe discussed how they might counter Apple’s position in smartphones, the New York Times said. The companies had held informal discussions about a Microsoft acquisition of Adobe several years ago, according to the report. Adobe has a market value of $15.1 billion.

Adobe spokeswomen Holly Campbell and Jodi Sorensen weren’t immediately available for comment. Frank Shaw, a spokesman at Redmond, Washington-based Microsoft, declined to comment.

Adobe forecast sales last month that fell short of analysts’ estimates, sending the shares down the most in eight years. Cash-strapped schools aren’t paying for as many copies of the product, which includes Photoshop and Illustrator, the San Jose, California-based company said. The sluggish economy in Japan, typically Adobe’s biggest Asian market, also hampered sales.

Microsoft's Windows Outpaces Apple in Customer Satisfaction

Bloomberg

Microsoft Corp. got a bigger boost in customer satisfaction from its latest computer operating system than rival Apple Inc. did from its most recent upgrade.

Respondents giving Microsoft a positive grade for satisfaction rose to 67 percent in the week after the Oct. 22 release of Windows 7, from 64 percent the day before it went on sale, according to YouGov Plc, a London-based market-research firm. Microsoft’s satisfaction rates rose 14 percent through the end of the year.

Apple’s Aug. 28 release of its Snow Leopard software resulted in a boost of 1 point to 65 percent in the first week. Through the end of the year, the increase was 6.9 percent.

The percentage of customers satisfied with Microsoft reached 73 percent on Dec. 31, the highest since YouGov started surveying in 2007. Microsoft’s reputation is benefiting from the positively reviewed Windows 7, after some customers held off personal-computer purchases to avoid the product’s predecessor, Vista, said Matt Rosoff, an analyst at Kirkland, Washington- based Directions on Microsoft.

“People are saying, ‘Okay, Microsoft got its mojo back,’” he said. “People who were thinking about buying a new PC are more likely to do so now. You’ll see slightly better sales.” Rosoff said the boost is probably also due to the June release of Microsoft’s overhauled Bing Internet search engine.

Microsoft’s Windows runs more than 90 percent of the world’s personal computers. The Windows division, Microsoft’s most profitable, accounted for about a quarter of the company’s sales last fiscal year.

“We’re encouraged that we’re delivered a version of Windows that meets what our customers want: a simpler PC that fits with their life,” said Tami Reller, a Windows vice president.

Apple declined to comment, said Bill Evans, a spokesman for the Cupertino, California-based company.

Bill Gates Shares His Thoughts

CNET

SEATTLE--Now you have a chance to compare notes with Bill Gates.

The Microsoft chairman is launching a Web site on Wednesday designed to to share his thoughts on everything from his foundation work to musings on other topics including energy and the environment.

Dubbed Gates Notes, the site is launching with postings from Gates himself, and in the works are plans to allow for more discussion on the topics he raises.

In an exclusive interview, Gates told CNET that he missed having the kind of Web presence he had at Microsoft.

"The Internet is tailor-made for the kind of activities I am involved in," Gates said. "When I take a trip, we have all these photos. People want to see that and it's very easy to put it up there. If I read a book, some people are considering whether to read that book or want a short understanding of what that's like."

Gates said he plans to post content about three times a week, with some posts being brief and others being more in-depth.

"I think it's going to be a lot of fun to share on an ongoing basis," Gates said, adding that he is looking forward to the feedback. "It will help guide me."

In its initial form, the site features articles on education reform, lessons from the swine flu pandemic, and the need for help in Haiti. There's also a podcast series with Gates speaking on climate change and the challenges of developing friendlier alternatives to today's energy sources. (Along with being available for download from the Gates Notes site, the podcasts will be on both iTunes and the Zune Marketplace, I'm told).

Although energy and climate issues are not something the Bill & Melinda Gates Foundation has directly focused on, it is an area of keen interest for Gates and will be the focus of his talk at next month's TED conference.

"The interest in some of the energy things I have been doing has been very high so I will elaborate on that," Gates said.

Gates Notes also features a section on Gates' travels, where he narrates some of the video footage taken on trips, such as last year's visit to India. Another section includes notes on some of the books Gates is reading.

Another section, dubbed "conversations," is designed to include both interviews with Gates as well as excerpts from some of the long e-mail exchanges he has with various thinkers as well as question-and-answer sessions with students from around the world.

The launch of Gates Notes comes a day after Gates joined Twitter, where he quickly racked up hundreds of thousands of followers.

Although Gates Notes draws on work from the foundation, as well as from Gates' work at Microsoft and at Nathan Myhrvold's Intellectual Ventures, the Web site is a project of his personal staff.

Bing Gaining . . . But Not On Google

LA Times

Bing, the nearly 6-month-old search engine from Microsoft Corp., has steadily been capturing more of the Web search market.  But instead of stealing users from market leader Google Inc., Bing is still siphoning them from ally Yahoo Inc.

Bing captured 10.3% of the search pie in November, according to the latest numbers released by ComScore Inc and reported today by the Associated Press.  That's up from 9.9% the month before.  But Yahoo's share decreased by about the same margin, dropping from 18.0% to 17.5% during the same period. 

Yahoo and Microsoft, which signed a deal in late July to allow Microsoft to operate the search engines for both companies, have not been able to boost their combined market share much past 28%, where it's been hovering at least since the debut of Bing.

Meanwhile, market leader Google has been slowly but surely gaining share, rising from 65% in June, when Bing launched, to 65.6% in November.

Microsoft Announces 800 Layoffs

CNN Money

Microsoft Corp. will eliminate 800 more positions from its workforce, the company announced Wednesday.

The company said the job cuts will be spread across multiple businesses and locations across the globe, but Microsoft would not specify when the layoffs would occur.

Those job cuts come on top of the 5,000 jobs the company said it was slashing earlier this year, in what was Microsoft's first mass job cut announcement in its 34-year history as a public company.

The company also confirmed that it has completed those layoffs ahead of schedule. Microsoft initially said the 5,000 job cuts would be done by June 2010.

"We continue to hire in priority areas, but also understand that continuing to manage our businesses closely, as we always do, can mean additional headcount adjustments," said a Microsoft spokesman.

Cost-cutting helped the company impress investors late last month, when the Redmond, Wash.-based software giant reported quarterly sales and profit that easily beat Wall Street's forecasts.

Microsoft's headcount was down 4% in the past quarter from the same period year ago -- the largest yearly staffing decline in the company's history. Microsoft employs some 90,000 people worldwide.

Microsoft's Performance Beats Expectations, But Still Falls

from Wall Street Journal

 Microsoft Corp. added to the view that recovery is taking hold across the technology sector, beating expectations for its fiscal first-quarter earnings even as profit declined 18% from last year.



Shares of the world's largest software maker jumped 11% to $29.42 as consumer demand for Windows and the company's Xbox videogame systems offered a reason for optimism, one quarter after Microsoft's first full year of declining sales as a public company.

"We are very pleased with our performance this quarter and particularly by the strong consumer demand for Windows," Microsoft Chief Financial Officer Chris Liddell said.

The slump in global PC sales and broad economic weakness has battered Microsoft's results over the last year, compounding already weakened demand for Windows Vista. But on Thursday, the company moved to recharge revenue growth with the launch of its next-generation operating system, Windows 7.

After suffering revenue drops across all five of its businesses last quarter, Microsoft saw growth in its server and tools division, while its entertainment unit remained roughly flat with last year.

Revenue for its Windows unit, Microsoft's largest division, was still down 39% from last year, and earnings for the division fell 52%. But the introduction of Windows 7 is already beginning to show signs of strength. Deferred revenue for pre-sales of the new software totalled $1.47 billion.

For the quarter ended Sept. 30, Microsoft reported earnings of $3.57 billion, or 40 cents a share, down from $4.37 billion, or 48 cents a share, a year earlier. Revenue declined 14% to $12.92 billion.

Analysts polled by Thomson Reuters expected earnings of 32 cents on revenue of $12.37 billion.

The company's server and tools was the only one to post revenue growth, albeit 0.5% growth, while sales at the business division fell 11%.

In online services, a small but important division, revenue decreased 5.8%.

In addition to its updated Windows software, Microsoft is also looking to broaden its relevance beyond the desktop personal computer into newer types of devices like the light-weight netbook and a new line of smartphones.

Meanwhile, Microsoft reduced its full-year operating expense guidance by $400 million to between $26.2 billion and $26.5 billion.

"We also maintained our cost discipline, which allowed us to drive strong earnings performance despite continued tough overall economic conditions," Mr. Liddell said.

Google Wooing Microsoft Business Customers

AFP

SAN FRANCISCO — Google on Monday ramped up a campaign to convert businesses worldwide into users of email, calendar, document and other software programs it offers online as services on the Internet.

"Gone Google" advertising was expanded to Britain, France, Canada, Japan, Australia, Singapore, and other countries.

Ads are being displayed in places such as train stations and airports "to help companies, schools and organizations learn all about the benefits of going Google with our enterprise products."

Google has been enhancing and expanding online software services as a trend toward Internet-based cloud computing has gained momentum.

Companies hustling to survive in grim economic conditions have been attracted to cost savings that stem from renting software instead of buying, installing and maintaining it on their own machines.

US software giant Microsoft has responded to the trend with a "software plus services" model that combines its core packaged products with programs hosted online.

Google Apps programs hosted on the Internet giant's computers are used by more than two million businesses in more than 100 countries, according to a blog post by Vivian Leung and Tom Oliveri of the Google Enterprise Team.

"Each day, thousands of companies choose to 'go Google,' that is, switch to Google Apps,' Leung and Oliveri said.

"These companies no longer have to deal with the hassles of managing email servers or rolling out software updates, and their employees now enjoy the convenience of shared documents and calendars, Gmail and more."

Konica Minolta, Rentokil Initial, and TOTO are among firms that have recently "gone Google," according to Leung and Oliveri.

Early this year, Microsoft added to its international menu Office Communications Online and Deskless Worker Suite software that handle tasks such as email, calendars, collaboration, and instant messaging.

Microsoft's new Windows 7 operating system to be released on Thursday and Office 2010 business software programs to make their debut next year have reportedly been crafted with cloud computing in mind.

IBM this month announced a basic "cloud computing" email service at a price that undercuts a plusher offering by Google.

IBM unabashedly pitched its new LotusLive iNotes as an alternative to email service Google has been promoting as part of a campaign to win businesses over to using applications hosted as services on the Internet.