Beyond the Salesforce.com IPO

After putting aside months of buildup and weeks of delays, Salesforce.com successfully relaunched as a public company one week ago. The company's stock priced higher than anticipated for the first investor sales, and first-day stock performance was the highest for any IPO so far this year. The company has traded at a substantial premium to its $11 IPO price since inception. So Salesforce.com appears to have enjoyed substantial success, given the current market climate. "I don't know what a 'normal offering' is at this point," says David Menlow, president of IPOfinancial.com, "but this stock, in a different market cycle, probably could have tripled at the opening as a minimum. We are down to more sobering times." It's too early to tell how life under the demands of a public company will affect Salesforce.com, as the company has not yet emerged from the 40-day post-IPO quiet period. "I'm anxious to see what is in store for the market after the quiet period is over and [Salesforce.com CEO Marc] Benioff doesn't have to worry to the same extent," Menlow says. What Benioff does have to worry about is preserving the company's performance when rampant growth is no longer an option. "One of the big things [Salesforce.com is] struggling with is the attrition issue," says Laura Preslan, CRM research director at AMR Research. "The majority happens with the little implementations that have not really bought in, or [after] a corporate standard has been delivered when Salesforce.com is used as a stopgap." Despite some criticism of the company's relatively compact engineering staff and investment in R&D, Preslan says she believes Salesforce.com will continue to deliver new functionality to customers on a quarterly basis. "That's what customers like about them, and since they've already set that pattern, they're not going to back off." Financial-analyst Web site Motley Fool calls the Salesforce.com debut a harbinger of the "Dot-Com Echo," and CRM insiders see it as a potential return to acceptance by the investment community. Online customer service outsourcer RightNow Technologies is on course for an IPO later this year, while Salesforce.com competitor Salesnet has openly discussed the prospect of a 2005 offering. It isn't just new-age on-demand companies looking for investment capital, either--stalwart FrontRange Solutions, developers of the popular GoldMine package, says it is also looking into going public at the end of this year. Referring to Salesforce.com's IPO, Menlow says that it's "going to be a foundation-builder for other companies in related fields," but that the IPO "does not sound the all-clear for all stocks in this sector. They still have to pass the basic criteria, which is a strong company, strong management, and strong fundamentals."
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