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Suspicious minds as Salesforce.com leaves the building

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5th Mar 2012
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The news that Cloud Computing giant Salesforce.com has cancelled plans to build a new global headquarters in the Mission Bay neighborhood of San Francisco has sent the rumour mill into overdrive over the past week.

Salesforce.com originally announced its intentions to build a new worldwide campus in 2010 after outgrowing the roughly 700,000 square feet it currently occupies across four buildings in downtown San Francisco.
The firm agreed to pay $278 million for 14 acres of undeveloped land in the Mission Bay neighbourhood, the costliest land purchase in the city in years, according to local real-estate experts.
And Salesforce.com planned to use the land to build a nearly two-million-square-foot campus, that would consist of eight major buildings with state-of-the-art facilities to put it at the leading-edge of environmental and energy developments.
But only days before the company was due to complete a variety of permits to secure its right to build on the site, Salesforce.com announced that it was pulling the plug on its new HQ, and would instead be leasing space downtown.
The Cloud business insisted that its hand was forced by logistics – Salesforce chief messaging officer Bruce Francis told Reuters: “We are growing now faster than we were growing at the time when we originally made the decision to build the campus. We are going to need space faster than we could build it.”
As a result, SF.com decided that the best long-term solution would be to suspend development of the HQ and instead sign long-term leases in the downtown area.
Does this all add up though?
“Going ahead with the campus would not negate the renting of additional facilities, much like Salesforce.com is now doing via long-term leases. It would simply require shorter-term leases until the new facilities were constructed,” reasoned Paulo Santos, concluding that the company is either conserving cash for other purposes (i.e. acquisitions) or is not as confident as it would have you believe about its profitability.
It is certainly not unreasonable to assume that in the wake of some significant recent deals from rivals including SAP and Oracle (which launched a billion dollar swoop for RightNow at the end of 2011), CEO Marc Benioff and/or the company’s board of directors would reconsider spending billions of dollars on a new campus.
But the announcement has also lent credence to those who choose to believe that the Cloud giant isn’t as financially hunky-dory as it appears. As Arik Hesseldahl wrote on All Things Digital, “The decision is going to add another log on the fire for Salesforce’s critics, who have argued that its shares are too expensive, and that its CEO, Marc Benioff, has no discipline when it comes to controlling expenses.”
Coming a few days after Salesforce.com’s quarterly results, which revealed that its combined annual operating expenses had grown 46% to $1.8 billion in 2011, there is certainly plenty of fodder for the suspicious-minded.
Yet the same results also defied analysts’ expectations with adjusted earnings up 39% and sales 38% higher – sending the company’s stock soaring.
One thing is certain – having pulled the plug on a project that cost the firm over $250m on real estate plus architect and contractor fees, few are willing to accept the official line being communicated by the company.
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By Yreuven
05th Mar 2012 15:37

 They're lying about reasoning to abandon real estate expansion, and also assuming everyone is stupid enough to believe it.  The great thing about time is that it will always tell the true story eventually. 

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By arynjosh
24th Sep 2012 15:54

They stirred the rumor mill into action. Oh, how fast a gossip can travel. - Instant Tax Solutions

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