Salesforce.com 2012 Annual Report Download - page 20

Download and view the complete annual report

Please find page 20 of the 2012 Salesforce.com annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 120

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120

If we experience significant fluctuations in our rate of anticipated growth and fail to balance our
expenses with our revenue forecasts, our results could be harmed.
Due to our evolving business model and the unpredictability of future general economic and financial
market conditions, we may not be able to accurately forecast our rate of growth. We plan our expense levels and
investment on estimates of future revenue and future anticipated rate of growth. We may not be able to adjust our
spending quickly enough if the addition of new subscriptions or the renewal rate for existing subscriptions falls
short of our expectations. A portion of our expenses may also be a fixed cost in nature for some minimum
amount of time, such as with a datacenter contract or office lease, so it may not be possible to reduce costs in a
timely manner or without the payment of fees to exit certain obligations early.
As a result, we expect that our revenues, operating results and cash flows may fluctuate significantly on a
quarterly basis. Our recent revenue growth rates may not be sustainable and may decline in the future. We
believe that period-to-period comparisons of our revenues, operating results and cash flows may not be
meaningful and should not be relied upon as an indication of future performance.
We cannot accurately predict subscription renewal or upgrade rates and the impact these rates may have
on our future revenue and operating results.
Our customers have no obligation to renew their subscriptions for our service after the expiration of their
initial subscription period, which is typically 12 to 24 months, and in fact, some customers have elected not to
renew. In addition, our customers may renew for fewer subscriptions, renew for shorter contract lengths, or
renew for lower cost editions of our service. We cannot accurately predict renewal rates given our varied
customer base of enterprise and small and medium size business customers and the number of multiyear
subscription contracts. Our renewal rates may decline or fluctuate as a result of a number of factors, including
customer dissatisfaction with our service, customers’ spending levels, decreases in the number of users at our
customers, pricing changes and deteriorating general economic conditions. If our customers do not renew their
subscriptions for our service or reduce the number of paying subscriptions at the time of renewal, our revenue
will decline and our business will suffer.
Our future success also depends in part on our ability to sell additional features and services, more
subscriptions or enhanced editions of our service to our current customers. This may also require increasingly
sophisticated and costly sales efforts that are targeted at senior management. Similarly, the rate at which our
customers purchase new or enhanced services depends on a number of factors, including general economic
conditions and that our customers do not react negatively to any price changes related to these additional features
and services. If our efforts to upsell to our customers are not successful and negative reaction occurs, our
business may suffer.
We rely on third-party computer hardware and software that may be difficult to replace or which could
cause errors or failures of our service.
We rely on computer hardware purchased or leased and software licensed from third parties in order to offer
our service, including database software from Oracle Corporation. This hardware and software may not continue
to be available at reasonable prices or on commercially reasonable terms, or at all. Any loss of the right to use
any of this hardware or software could significantly increase our expenses and otherwise result in delays in the
provisioning of our service until equivalent technology is either developed by us, or, if available, is identified,
obtained through purchase or license and integrated. Any errors or defects in third-party hardware or software
could result in errors or a failure of our service which could harm our business.
Weakened global economic conditions may adversely affect our industry, business and results of
operations.
Our overall performance depends in part on worldwide economic conditions. The United States and other
key international economies have experienced in the past a downturn in which economic activity was impacted
16