Salesforce.com 2005 Annual Report Download - page 37

Table of Contents
(1) Cost of revenues and operating expenses include stock-based expenses, consisting of:
Fiscal Year Ended January 31,
2006 2005 2004 2003 2002
Cost of revenues $ 575 $ 634 $ 655 $ 428 $ 369
Research and development 332 282 462 402 436
Marketing and sales 1,325 1,296 2,029 1,696 1,422
General and administrative 1,216 1,402 1,213 2,241 2,224
Total stock-based expenses $ 3,448 $ 3,614 $ 4,359 $ 4,767 $ 4,451
(2) For information regarding the computation of per share amounts, refer to note 1 of the notes to our consolidated financial statements.
(3) Cash, cash equivalents and marketable securities includes net proceeds of $113.8 million from our sale of 11,500,000 shares of common stock in June
2004 from our initial public offering.
(4) Paying subscriptions are defined as unique user accounts, purchased by customers for use by their employees and other customer-authorized users that
have not been suspended for non-payment and for which we are recognizing subscription revenue.
(5) Net income during fiscal 2006 included a $6.8 million income tax benefit which was recorded during the third quarter. This benefit represented $0.06 of
basic and diluted net income per share for the year.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains forward-looking statements, including, without limitation, our expectations regarding our outlook and future
revenues, expenses, results of operations and liquidity. Our actual results may differ significantly from those projected in the forward-looking statements.
Factors that might cause future actual results to differ materially from our recent results or those projected in the forward-looking statements include, but are
not limited to, those discussed in the section titled "Risk Factors Which May Impact Future Operating Results." We assume no obligation to update the
forward-looking statements or our risk factors.
Overview
We are the leading provider, based on market share, of application services that allow organizations to easily share customer information on demand,
according to an August 2005 report by IDC. We provide a comprehensive CRM service to businesses of all sizes and industries worldwide.
We were founded in February 1999 and began offering our on-demand CRM application service in February 2000.
In order to increase our revenues and take advantage of our market opportunity, we will need to continue to add substantial numbers of paying
subscriptions. We plan to re-invest our revenues for the foreseeable future by expanding our data center capacity and upgrading our new development and test
data center; hiring additional personnel, particularly in customer-related areas; expanding our domestic and international selling and marketing activities;
increasing our research and development activities to upgrade and extend our service offerings and to develop new services and technologies; expanding the
number of locations around the world where we conduct business; adding to our infrastructure to support our growth; and expanding our operational systems
to manage a growing business. Additionally, in our effort to further strengthen and extend our service offering, we may also in the future acquire or make
investments in complementary companies, services and technologies.
As our revenues increase, we expect marketing and sales costs, which were 48 percent of our total revenues for fiscal 2006 and 55 percent of our total
revenues for the same period a year ago, to continue to represent a substantial portion of total revenues in the future as we seek to add and manage more
paying subscribers, build brand awareness and increase the number of marketing events that we sponsor.
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