Global Equities Research has downgraded Salesforce.com (NYSE: CRM) to equal weight, saying that the company would face stiff competition that may hurt revenue and margins.
Salesforce.com is going to face increased competitive challenges, which may reduce Salesforce.com win-rates, lengthen sales cycle and put margin pressure, analyst Trip Chowdhry wrote in a note to clients.
The analyst said Salesforce.com is not well positioned to ride the next wave of technological and behavioral shifts, which are virtualization and data portability. Meanwhile, Oracle (NASDAQ: ORCL) has raised the bar on cloud computing, which will be extremely difficult for Salesforce.com to meet, especially on the architectural level and at the business level.
Chowdhry noted that Salesforce.com's Platform-as-a-Service offering (Force.com and Heroku) is starting to struggle against VMware (NYSE: VMW) and Red Hat (NYSE: RHT) and the success from its acquisition of Radian6 was short-lived as Google (NASDAQ: GOOG) and Twitter quickly entered the space with other social media analytics acquisitions.
It seems to us that now Radian6 will not be a revenue generator, that we previously expected it to be, the analyst said.
The analyst also cut its fiscal 2012 earnings view to $1.30 a share from $1.31 a share and revenue forecast to $2.228 billion from $2.234 billion. Wall Street expects Salesforce to earn $1.30 a share on revenue of $2.23 billion for fiscal 2012.
Shares of Salesforce were down $4.38, or 3.15 percent, to $134.76 on the New York Stock Exchange. Chowdhry has a price target of $95 on Salesforce stock.