Facebook Twitter

Salesforce.com’s market debut a big hit

Shares soared 56% to close at $17.20 on the Big Board

SHARE Salesforce.com’s market debut a big hit

SAN FRANCISCO — Salesforce.com Inc.'s stock soared 56 percent in its market debut Wednesday, providing another sign that investors have shaken off the bad memories — and huge losses — from the dot-com bust of few years ago.

The online software pioneer's shares rose $6.20 from their initial public offering price to close at $17.20 on the New York Stock Exchange.

The performance, which left Salesforce.com with a $1.7 billion market value, outstripped the average first-day gain of 13 percent posted by companies that have gone public so far this year, according to Renaissance Capital, a Greenwich, Conn. research firm.

Wall Street's enthusiastic reception followed a rush to participate in Salesforce.com's coming-out party, enabling the San Francisco-based company to raise its IPO price by 38 percent to $11 per share.

After paying its investment bankers and other costs incurred in the deal, Salesforce.com expects to pocket $98.3 million from the offering of 10 million shares, according to documents filed Wednesday with the Securities and Exchange Commission.

Conceived in 1999 during the Internet boom, Salesforce.com is one of the few companies from that era that continue to punctuate its corporate name with "dot-com." Most other online companies that survived the dot-com downturn tweaked their names to distance themselves from the financial ruins that devastated the high-tech industry and triggered massive losses in the stock market.

Even after the bust, Salesforce.com remained the quintessential dot-com, promising to leverage the Internet to shake up the status quo while management spent freely to promote the company's brand and reward employees.

In recent years, Salesforce.com has rented the San Francisco Giants' baseball stadium to hold a company picnic and introduced a new product at a private movie screening of "Terminator 3" with star Arnold Schwarzenegger on hand to meet with customers and other guests.

The biggest difference between Salesforce.com and yesteryear's Internet companies shows up on the income statement.

Unlike early dot-com firms, Salesforce.com makes money, earning $3.5 million on revenue of $96 million in its last fiscal year ending in January. The company posted a profit of $437,000 on revenue of $35 million during the first quarter of the current year.

Salesforce.com's financial success, coupled with its promising growth prospects, made its Internet heritage irrelevant to investors, said David Menlow, president of IPO Financial, an industry letter.

"Bottom line, this is a a company with a good story," Menlow said. "The dot-com label is neither a detriment nor a benefit."

Salesforce.com's stock market debut represents a prelude to an Internet IPO expected to stir even more investor excitement.

Online search engine Google Inc. is currently preparing to raise $2.7 billion in an unusual auction designed to make it easier for Main Street investors to participate in the offering. Google is extremely profitable, earning $106 million last year.

Although not as well known as Google, Salesforce.com set itself apart by allowing its customers to subscribe to software applications available over the Internet.

The approach contrasts with the industry's longtime tradition of charging a one-time license fee for software that's installed on individual computers. The approach emboldened Salesforce.com's audacious CEO, Marc Benioff, to predict his company will cause "the end of software."

Benioff's talkative nature temporarily derailed Salesforce.com's IPO. After Benioff cooperated with a New York Times article published last month, the company delayed the IPO to avoid running up against securities laws requiring a "quiet period" leading up to company's stock market debut.

Benioff, 39, had reason to smile after his company's successful stock market debut. His 27.8 percent stake in Salesforce.com was worth $485 million at Wednesday's close.