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Salesforce lifts forecast on strong demand for cloud software

By Soham Chatterjee

(Reuters) - Salesforce.com Inc reported better-than-expected quarterly revenue, helped by an increase in demand for its web-based sales and marketing software, and raised its full-year profit and revenue forecast.

Businesses are increasingly moving toward cloud software services that cost less and are easier to manage, helping companies such as Salesforce and human resource management software provider Workday Inc.

Spending on enterprise resource management and customer relationship management has been particularly strong. Research firm IDC expects ERM and CRM software sales to grow 20 percent at a compounded annual rate every year from 2013 to 2018. (http://bit.ly/1n8p3gF)

Salesforce said on Thursday it expects an adjusted profit of 50-52 cents per share on revenue of $5.34-$5.37 billion for the year ending Jan. 31. It had previously forecast an adjusted profit of 49-51 cents on revenue of $5.30-$5.34 billion.

Analysts were expecting a profit of 51 cents per share on revenue of $5.34 billion, according to Thomson Reuters I/B/E/S.

The company said unbilled revenue rose by about a third to $5 billion at the end of the second quarter.

"We continue to see greater upside potential in the second half as our checks suggest there are mega-deals in the pipeline that could close, aided by the maturing efforts of CRM's new vertical-led strategy," Susquehanna analyst J. Derrick Wood said in a pre-earnings note.

Salesforce, which competes with Germany's SAP SE and Oracle Corp among others, is investing in software targeted at specific sectors such as healthcare to boost growth.

In June, Dutch healthcare and lighting company Philips said it was teaming up with Salesforce to offer online management of chronic diseases.

Salesforce has also been buying providers of data analytics and marketing software to boost growth.

The company bought data analytics firm RelateIQ Inc for about $390 million last month, its largest deal since its $2.5 billion acquisition of e-mail marketing firm ExactTarget last year.

Salesforce reported net loss of $61.1 million, or 10 cents per share, for the second quarter ended July 31, compared with a profit of $76.6 million, or 12 cents per share, a year earlier.

On an adjusted basis, the company earned 13 cents per share.

Revenue rose to $1.32 billion from $957.1 million.

Subscription and support revenue, which accounts for 93 percent of total revenue, rose 37 percent. Professional services revenue rose 58 percent.

Analysts on average had expected a profit of 12 cents per share on revenue of $1.29 billion, according to Thomson Reuters I/B/E/S.

Salesforce's shares up slightly in extended trading on Thursday after closing at $55.71 on the New York Stock Exchange. The stock has gained 11 percent in the last three months.

(Reporting by Soham Chatterjee in Bangalore; Editing by Maju Samuel and Saumyadeb Chakrabarty)

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