Salesforce.com 2013 Annual Report Download - page 35

encourage the development of third-party applications on our platforms and continue to focus on retaining
customers at the time of renewal. Our plans to invest for future growth include the continuation of the expansion
of our data center capacity, the hiring of additional personnel, particularly in direct sales, other customer-related
areas and research and development, the expansion of domestic and international selling and marketing activities,
continuing to develop our brands, the addition of distribution channels, the upgrade of our service offerings, the
development of new services, the integration of acquired technologies, the expansion of our Marketing Cloud and
Salesforce Platform service offerings and the additions to our global infrastructure to support our growth.
We also regularly evaluate acquisitions or investment opportunities in complementary businesses, joint
ventures, services and technologies, and intellectual property rights in an effort to expand our service offerings.
We expect to continue to make such investments and acquisitions in the future and we plan to reinvest a
significant portion of our incremental revenue in fiscal 2014 to grow our business and continue our leadership
role in the cloud computing industry. As a result of our aggressive growth plans, specifically our hiring plan and
acquisition activities, we have incurred significant expenses from equity awards and amortization of purchased
intangibles which have resulted in net losses on a GAAP basis. As we continue with our growth plan, we
anticipate we will have net losses on a GAAP basis for the next several quarters.
In November 2010, we purchased approximately 14 acres of undeveloped real estate in San Francisco,
California, including entitlements and improvements associated with the land. We have capitalized all pre-
construction activities related to the development of the land, including interest costs and property taxes since the
November 2010 purchase. During the first quarter of fiscal 2013, we suspended pre-construction activity. The
total carrying value of the land, building improvements and perpetual parking rights was $321.1 million as of
January 31, 2013. We continue to evaluate our future needs for office facilities space and our options for the
undeveloped real estate.
We expect marketing and sales costs, which were 53 percent of our total revenues for fiscal 2013 and
52 percent for fiscal 2012, to continue to represent a substantial portion of total revenues in the future as we seek
to add and manage more paying subscribers, and build greater brand awareness.
On August 13, 2012, we acquired the outstanding stock of Buddy Media, Inc., (“Buddy”), a social media
marketing platform. We acquired Buddy for the assembled workforce, expected synergies and expanded market
opportunities when integrating Buddy’s social media marketing platform with our current offerings. The
financial results of Buddy are included in our consolidated financial statements from the date of acquisition. The
total purchase price for Buddy was $735.8 million.
We regularly assess the need for a valuation allowance against our deferred tax assets. In making that
assessment, we consider both positive and negative evidence related to the likelihood of realization of the
deferred tax assets to determine, based on the weight of available evidence, whether it is more-likely-than-not
that some or all of the deferred tax assets will not be realized. In our evaluation, we considered our cumulative
loss in recent years and our forecasted future losses as significant pieces of negative evidence. During the third
quarter of fiscal 2013, we determined that the negative evidence outweighed the positive evidence as of
October 31, 2013 and recorded a one-time, non-cash charge to income tax expense in the third quarter of fiscal
2013 in the amount of $149.1 million to establish a valuation allowance for a significant portion of our deferred
tax assets. This accounting treatment has no effect on our actual ability to utilize deferred tax assets such as loss
carryforwards and tax credits to reduce future cash tax payments. We will continue to assess the realizability of
the deferred tax assets in each of the applicable jurisdictions going forward and adjust the valuation allowance
accordingly.
Fiscal Year
Our fiscal year ends on January 31. References to fiscal 2013, for example, refer to the fiscal year ending
January 31, 2013.
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