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Salesforce.com Sees Competition Heat Up in Cloud Technology Space

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Jun. 8 2015, Updated 8:06 a.m. ET

Subscription and support services make up most of Salesforce.com revenues

As we saw in Part 1 of the series, Salesforce.com (CRM) generated ~93% of its fiscal 1Q16 revenue from subscription and support fees associated with cloud services. This demonstrates the extent to which the company is invested in cloud-based application services.

The chart below shows how the firm’s various offerings contributed toward subscription revenues in 1Q16.

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Performance by offering

In 1Q16, revenues from subscriptions to the firm’s Sales Cloud and Service Cloud came in at ~$630 million and $408 million, respectively.

The Salesforce1 Platform and ExactTarget Marketing Cloud—Salesforce.com acquired ExactTarget in 2013—generated revenues of ~$224 and $143 million, respectively. For more on ExactTarget, read Acquisitions are significant in Salesforce.com’s revenue growth.

Technology players are taking advantage of growth in the cloud space

Salesforce.com has a leadership position in the CRM (customer relationship management) space. Yet, it appears it’s not the only company benefitting from the growth in the SaaS (software-as-a-service) market. Indeed, Salesforce.com is seeing more and more competition from other leading players in cloud computing technology.

In fiscal 3Q15 ending March 31, 2015, Microsoft’s (MSFT) commercial cloud business reported 106% growth. Meanwhile, Oracle’s (ORCL) SaaS and PaaS (platform-as-a-service) business grew by 30% in fiscal 3Q15 ending February 28, 2015. IBM (IBM) also saw its cloud service register 65% growth in its recent fiscal quarter ending March 31, 2015.

For diversified exposure to Salesforce.com, you can invest in the Technology Select Sector SPDR Fund (XLK). XLK invests about 1.07% of its holdings in Salesforce.com.

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