fortune 500

  • February 28, 2014
  • Salesforce CEO, Marc Benioff

    Salesforce CEO, Marc Benioff

    Two numbers to keep in mind: $4.8208 billion and $5.25 billion.  The first number is the 2013 revenue reported by Nash-Finch.  According to Wikipedia and Fortune magazine, the company is based in Edina, Minnesota, near Minneapolis.  It is involved in “Food distribution to private companies, primarily independent supermarkets, and military commissaries; and the operation of retail stores,” according to its Wikipedia page.  According to Fortune, the company was number 498 on its list of 500 largest American companies in 2012.  In 2013, it ranked number 500.

    The second number is the low end of the fiscal year 2015 guidance just offered up by in a conference call with analysts and a press release from earlier this week.  If you can do a little math and draw a straight line or two, this data would suggest that a year from now Salesforce will occupy at least the number 500 position in Fortune’s vaunted list.  But keep in mind that there are other companies out there with similar stories.

    So this is no time to estimate chicks by counting eggs in the incubator, if you know what I mean.  But for armchair prognosticators, it strongly suggests that absent a major stumble, well, you know.  One thing that bolsters the company’s chances even more than my simple assumptions is the amount of uncounted (but NOT unaccounted) cash on the books.  According to the press release, the company has:

    • Deferred Revenue of $2.52 Billion, up 35% Year-Over-Year
    • Unbilled Deferred Revenue of Approximately $4.50 Billion, up 29% Year-Over-Year

    These measures are a testament to the power of the subscription model and one reason I have been such a fan of it.  Subscription revenues get recognized as they are billed or, if the revenue is deferred, each month when the bills go out, the customer’s balance is dinged (that’s a technical term).  Deferred revenue refers to cash on the books and in the bank that will be dinged. Unbilled deferred revenue refers to cash under contract that has not been either billed or collected because it is accounted for in a future fiscal year.  Think of it as ding-able in the future.

    No matter how you slice it, Salesforce has a lot of momentum with most recent Quarterly Revenue of $1.15 Billion, up 37% Year-Over-Year, a forecast that is amazing, and lots of cash in the bank.  These results and the forecast show what a good job the company has done in building a repeatable business and the power of the subscription model when done right.  I don’t think there will be any escaping the speculation about the Fortune 500 this year, which might put a little pressure on everyone at One Market Street in San Francisco.  But by now, they’re used to it.

    Published: 10 years ago

    Salesforce announced it was holding off on the grand corporate office park it had been envisioning at Mission Bay in San Francisco.  It was a wise move by a company that should be focused on growth.

    In reading the Steve Jobs biography I was amused to see that he loved design so much that when he was given unfettered control he built some really, really nice corporate offices.  Sometimes it all worked out fine, as it did at Pixar, and sometimes it simply burned through cash as it did at NExT.

    Salesforce might have been wise to hold off on the massive building project for at least a couple of reasons.  Cash leads the list of course.  The company already spent over $100 million purchasing the 14 acre plot and not a shovelful of earth was moved.  Building the place was only going to turn the land into a money pit, so I applaud the decision.

    But the other reason is more dog food related.  Salesforce is pioneering the social enterprise, a strategy driven by its software that unites people in a company regardless of location, to improve corporate performance and customer delight.  So, you could easily say that Salesforce is its own test tube.  It is innovating on itself and expecting to share its findings with its social enterprise brethren.  How better to do this than by making do linking multiple floors and locations around San Francisco?

    It might not be ideal and it might not be fun (building things is great fun) but the company ought to be focused on cracking the Fortune 500 at this point—they’re so close—and a major building project might be defocusing.

    Back to the skunk works.

    Published: 12 years ago