Good afternoon. My name is Marvin and I will be your conference operator today. At this time, I would like to welcome everyone to the salesforce dotcomq3 fiscal 2011results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
Thank you. I would now like to turn the call over to our host, Mr. David Hadlick, VP of Investor Relations. Sir, you may begin your conference.
Thanks, Marvin. I'd like to welcome everyone to salesforce.com's Q3 call. Joining me as always for our results today are Marc Benioff, Chairman and CEO as well as Graham Smith, CFO. Following our prepared remarks today, we'll open things up to your questions. We're running on a very tight schedule, so I ask that you respectfully limit yourself to a single question.
And unfortunately, I will be muting your calls after you ask your question in hopes of getting to as many of you as possible. A complete disclosure of our Q3 results can be found in a press release issued about an hour ago as well as in our Form 8 ks filed with the SEC. Additional financial information including detailed historical financial statements and facts is available on our website. Our commentary today will include both GAAP and non GAAP metrics. Reconciliations between GAAP and non GAAP metrics for both our reported results and our forward guidance can be found in the press release.
At times in our prepared comments or in response to your questions, we may offer certain additional metrics to provide a greater understanding of our business or our quarterly results. Please be advised that we may or may not update these additional metrics on future calls. With that, let me make this call official with a brief Safe Harbor. The primary purpose of today's call is to provide you with information regarding our fiscal Q3 2011 performance. Some of our discussion or responses to your questions may contain forward looking statements.
These statements are subject to risks, uncertainties and assumptions. Should any of these or uncertainties materialize or should our assumptions prove to be incorrect, actual company results could differ materially from these forward looking statements. All of these risks, uncertainties and assumptions as well as other information on potential factors that could affect our financial results are included in our reports filed with the SEC, including our most recent report on Form 10 Q, particularly under the heading Risk Factors. To access our Q3 press release, including the GAAP to non GAAP recon, our historical results, any of our SEC disclosures or simply to learn more about salesforce dotcom, I encourage you to visit our Investor Relations website at salesforce.com/investor. In addition, a webcast of today's call will be available for 90 days and a dial in replay will be made available through December 17th.
Finally, before I turn the call over to Mark, please be advised unreleased services or features referenced in today's discussion or in other public statements are not currently available and thus may not be delivered on time or at all. Customers who purchase our services should make the purchase decisions based on services and features that are currently available. With that, let me turn the call over to Mark to discuss our results. Mark?
Hey, thanks very much, David, and I'm delighted to share our outstanding Q3 results with everyone today. Here's the highlights from the Q3. First, the Giants won the World Series, amazing. In other news, salesforce.comrevenue for the 3rd quarter rose to $429,000,000 an 7 quarters and our annual revenue run rate is now more than $1,700,000,000 Non GAAP EPS of $0.32 rose from $0.28 a year ago. We exceeded our EPS guidance even as we increased our investments in areas that are key for future growth.
3rd quarter operating cash flow was approximately $74,000,000 an increase of more than 100% from a year ago. Year to date, we've generated almost $300,000,000 in operating cash flow. That's up more than 60% from the same period last year. Our cash generation continues to be outstanding. And finally, while we have our important Q4 ahead of us, as we close out fiscal year 'eleven, I'm thrilled to announce a preliminary estimate for fiscal year 2012 of $1,970,000,000 to $2,000,000,000 The high end of that range would make puts us in an elite group of software companies to break through the $2,000,000,000 revenue threshold.
As evidence of our incredible growth, after taking a decade record our first $1,000,000,000 year in fiscal year 2,009, we now expect to double in size to $2,000,000,000 in just 3 years later in fiscal year 'twelve. Customer momentum continues to be strong. During the Q3, we added approximately 4,800 net new customers taking our global customer community to more than 87,200 with more than 19,000 net new customers over the past year, we've grown our customer base by more than 28%. The market opportunity for cloud computing is enormous and growing. And the shift to to the performance of each of our 5 product lines or as we call them the 5 clouds.
Now as many of you know, we made chatter generally available to all of our customers in June. And today, less than 5 months since its debut, we now report that over 60,000 that's 60,000 of our more than 87,000 in place today and it means that we've more than tripled the number of deployments since we first reported on Chatter adoption only 1 quarter ago. We've just never seen companies adopt any technology this widely, this fast and we think we're just getting going. New charter deployments in the Q3 included Amazon dotcom, Bausch and Lomb, Bank of America, Deloitte, Harrah's, productive. In a survey we commissioned customers reported that chatter has directly resulted in a 10% boost in productivity and e mail traffic by 13% on average.
And as companies see how Chatter improves communication and collaboration, many are expanding their deployments in the new departments and functions across their enterprises. And as we have noted, Chatter represents a huge opportunity for Salesforce force to expand outside of its current subscriber base and into new departments. This quarter, customers including Nokia, Panasonic, Sony have all purchased additional Salesforce subscriptions for Chatter. And I'm pleased to announce that Dell has now made Chatter available to more than 90,000 employees around the world, making it the largest customer of Salesforce Chatter. That is amazing.
Over 90,000 employees now are live at Dell on Salesforce Chatter. And Chatter is also helping salesforce.com reach entirely new customers. Companies that were previously not Salesforce customers including Yahoo! Bought subscriptions to use Chatter as a standalone collaboration platform and customers using Chatter tell us they're thrilled with the productivity gains and the open communication it brings to their organizations. It's safe to say that Chatter has become a major differentiator for our sales and service applications and force.com platform.
It only makes us stickier, improving retention, improving adoption and it helps us expand our presence with existing customers and win deals against our competitors. And that's why we believe Chatter is the next killer app from salesforce.com. Nothing speaks more to the shifts in our industry than when a large industry leading company replaces its legacy software in favor of the cloud. In this quarter, I'm delighted to platforms. The NetApp win highlighted an outstanding quarter for our flagship Sales Cloud, which delivered its biggest third quarter of new business ever.
During the quarter, we added new Sales Cloud business or expanded existing deployments at a long list of customers including FedEx, Ryder, Fujifilm Medical, Level 3 Communications, Ingram, Groupon, British Columbia Lottery and Vodafone. Relationships, we believe the growth opportunity for the sales cloud remains large. And our sales cloud customers are now enjoying the benefits of more accurate contact information with the data cloud. Based on the acquisition of Jigsaw, integration of Jigsaw is progressing well and new deals this quarter included Sharp, Amazon, Kaplan and Ariba. For our customers, better data means greater productivity, higher sales and higher levels of customer satisfaction.
For salesforce.com, the data cloud provides greater differentiation for our core sales and service clouds, lower attrition and a huge opportunity as we look to cross sell to our large global community of roughly 87,000 customers, we welcome them all to salesforce.com's new Jigsaw product line. And while we expect Jigsaw to become a future driver of growth, the Service Cloud is already delivering this significant growth today by fully integrating our sales and Service Cloud solutions, companies now have access to single integrated view of their customers. And with Chatter, they're able to resolve customer issues faster and more effectively than ever before. These benefits help power another huge business quarter for the Service Cloud, which once again was our fastest growing business in the 3rd quarter. Major wins or deployment expansions of the Service Cloud included Univision, RSA, Merrill Lynch, Mosaic, Paychex and the U.
S. Government Department of Commerce. Strong cross selling into our installed base along with sales to new customers has helped us to grow our total service cloud community to now approximately 30,000 sorry, 13,000 customers globally. But with a total customer a total customer community of more than 87,000, we're just scratching the surface of what's possible with salesforce.com's service cloud. Custom application development on our force.com platform continues to be another massive opportunity for salesforce.com.
Honestly, we think application development deployment remains our largest and most exciting opportunity that we continue to execute through fitforce.com the 1,000 force.com licenses, that's 100,000 force.com licenses at the New York City Department of Education. Together with salesforce.com partner Acumen Solutions, the New York Education Department plans to build 8 apps that teachers and administrators will use to track and boost students' performance. Additionalforce. Terrific adoption of the platform by partners and developers. Our developer community has grown to more than 310 1,000 up more than 100,000 in the last year alone.
This growing community of developers is putting the force dot com platform to good use, creating nearly 25,000,000 customizations, an increase of 38% year over year, more than 960,000 custom database tables up nearly 50% year over year, more than 185,000 custom apps, an increase of more than 50,000 year over year. And just last week, we celebrated another platform milestone, 1 power of platform as a service becoming the dominant way that application developers build applications in the future. And we're making more investments in that area. Of course, products are only great if people use them and that's why usage is an important indicator of customer success. And while trust, security, performance, reliability and availability our top priorities.
Our focus on building cloud service that customers love and use every day and adopt continues to yield some amazing results. During the Q3, the force.com platform delivered roughly 25,000,000,000 transactions, that's 25,000,000,000 dollars an increase of more than 50% from a year ago. That's amazing traction of a product and usage transactions every second of every day during the quarter. And we delivered these transactions with in real time at trust. Salesforce.com.
I encourage you to in real time at trust. Salesforce.com. I encourage you all to visit that site. It's the site that has our customers the transparency that has resulted in the trust that they have with salesforce.com. With 80 7,200 customers globally and a viral app in chatter that can take us enterprise wide, we're creating a great foundation for the future of our platform Together with a surging community of developers and ISVs, the long term growth opportunity for the platform has never been brighter.
In my opinion, there's never been a better time to be in the cloud and cloud computing industry. According to IDC, the cloud in of cloud services and our 5 clouds and our strong financial performance, the time to invest for growth and market leadership is absolutely now. And that's exactly what we're doing. 1st, people are our biggest growth driver, particularly in sales and engineering. And in Q3, we accelerated hiring by adding more than 300 net new employees and we continue to grow our workforce globally.
2nd, we're continuing to build out our data centers to support our accelerating transaction growth and international expansion plans. And as I indicated in our last call, we expect to have 2 additional data centers operational in the United States by the end of this year and then next year we will be live with our new production data center in Tokyo, Japan. 3rd, we continue to see the international market as large and mostly untapped growth opportunity. Rather than spread our resources too broadly, we're focusing our efforts on the top software markets of the world. We believe very strongly in this focused strategy of the top software markets and we believe scale and focus will allow us to accelerate our growth in these important markets.
Markets. That focus is why we acquired substantially, but we do have good sustainability. All of the non controlling interest owned shares in our Japanese subsidiary during the quarter. And 4th, earlier this month, we had made the decision to buy 14 acres of land here in San Francisco along with the long term goal of developing a corporate campus. Having a world class campus will enable us to better serve our customers, drive employee productivity by keeping our people together and most importantly, we believe it's going to allow us to attract and retain the best employees in the world right here in San Francisco, California.
Announce more exciting details as they shortly become available. And finally, we're evangelizing the cloud business model, so you should expect more global events. Speaking of events, today we're only 10 business days away, that's only 10 business days away from what has become the largest cloud computing event in the world, Dreamforce 2010. And it's an event like no other. First of all, we've already had more than 20,000 people registered and our internal estimates are that we'll have more than 25,000 in attendance at Dreamforce.
That will be spectacular and it will have the biggest selection of cloud computing products under one roof with more than 2 50 cloud vendors in the expo, the largest gathering of cloud experts leading more than 700 sessions. It is going to be the place to learn about the cloud, to experience the cloud and to meet the customers and partners that are putting it into place and creating the computing industry. On December 6, we have Cloudstock, which is our 1st worldwide developer conference that's linked to Dreamforce. Momentum and the growth in our customers at Cloudstock. Then on December 7, I'll open up a keynote session at 9 a.
M. Where we'll introduce new products and introduce you to customers who are making major deployments with Salesforce.com's cloud solutions. And that night on December 7, we'll have Stevie Wonder and Will. I. Am, the Head of the Black Eyed Peas entertained attendees at a special concert.
Then on December 8, we'll have our platform keynote where we plan to unveil the future of platform as a service. And then at 5 p. M, President Bill Clinton will join us for a keynote on stage. That evening at 7 p. M, Colin Powell will open our benefit concert for the UCSF Benioff Children's Hospital at the Masonic Hall and then Neil Young will play for all of us.
We look forward to seeing all of you in San Francisco for December 6, 7, 8 to join us and meeting some of these great leaders of our world and of our industry, great entertainers. And we want to thank all of you for your continued support of salesforce.com. Now with that, let me turn the call over to Graeme for the financial details of our outstanding Q3.
Thanks, Mark. Our 3rd quarter results as you've heard were outstanding across all key financial measures with our revenue, operating cash flow and attrition results all showing strength. Let me get into the detail. Revenue of $429,000,000 rose 30% year over year and year to date our revenue of $1,200,000,000 is up more than 26%. Subscription and support revenue grew even faster, posting year over year growth of more than 31% for the quarter and 27% year to date.
In addition to the
1st, a continued modest reduction in our attrition
rate 2nd, a solid pricing environment and 3rd, a weakening dollar. Let me briefly touch on each of these factors. First, our dollar attrition when compared to the year ago quarter is now back in the mid teens percentage range. In fact, the dollars we lost through attrition in Q3 were less in absolute terms than in the same quarter a year Q3 marks the 5th quarter in a row in which attrition has declined slightly. This trend is encouraging and has clearly been supported by an improving economic environment.
Having said that, we've been reluctant to anticipate improvements until they happen as a lot of different factors can affect the rate. As you're all aware, the 4th quarter is by far our largest renewals quarter, so we'll obviously provide an update for you in February. Mitigating attrition is important to our long term growth and we continue to focus on customer lifecycle and how we can best help our customers realize maximum value from their implementation of Salesforce. And we believe this focus will have a beneficial long term impact on retention. Turning to pricing, when we compare the net price per seat for the Professional Enterprise Unlimited Service Editions over the past 8 quarters, we continue to see very little change.
We believe that our investments in new technologies like helped make an already strong quarter even stronger. Dollars 7,000,000 of our sequential quarterly revenue increase was a result of changing FX rates. Conversely, our year over year revenue was actually reduced by $4,000,000 due to a small currency headwind. 3rd quarter revenue growth from a year ago in constant currency was 31%. In terms Americas, revenue rose by 26 percent to approximately $293,000,000 In Europe, revenue of just over $76,000,000 was up 26% in dollars and up 38% in constant currency.
And in Asia, revenue of $60,000,000 rose 62% in dollars and 53 40% in dollars and 44% in constant currency. International revenue now represents 32% of total revenue. As Mark indicated, our international growth strategy is to focus our resources in the top markets in the world, the top software markets
in the world and dominate in those markets. We continue
to see very strong growth in from non FFA products. Turning to the income statement. Our 3rd quarter non GAAP gross margin of 82% was up slightly versus both in expand our ecosystem of consulting partners. Non GAAP operating expenses were 67% of revenue for the Q3 up slightly from 66% a year ago and essentially flat sequentially. R and D expense was 10% of revenue and sales and marketing expense was 44%.
They're both up slightly from the year ago quarter the the year ago quarter. The biggest driver of expense growth in Q3 was accelerated hiring. During the quarter, we added just over 300 people to finish the quarter with approximately 4,750 employees. This represents an increase of almost 9 50 employees or 25 percent from a year ago and that of course includes the 150 people we added through the acquisition of Jigsaw. Given the importance of growing our distribution capacity and product development organization, we expect to hire more people in Q4 than we did in Q3.
Non GAAP operating margin of 15.4% was down slightly from last year due to the acquisition of Jigsaw. Our new business performance has been particularly strong through the 1st 3 quarters of the year. As a result, many of our sales commission bonus and part referral fee plans are trending well above 100 percent payout. Although we do capitalize and then amortize most of our direct sales commissions, important to remember that the great majority of our total sales costs are expensed as incurred. As I mentioned a moment ago, we also hired aggressively to continue our strong growth trajectory.
Our 4th quarter performance will affect our revenue exit rate at the end of the year and hence will inform our hiring and investment decisions for fiscal 2012. We continue to believe the best way to create long term shareholder value is to extend our leadership and dominate our markets through aggressively growing our business. Moving on to cash flow, operating cash flow for the Q3 was approximately $74,000,000 that's an increase of roughly 108% from a year ago. Year to date we've generated more than $293,000,000 in operating cash flow that's an increase of more than 64% from a year ago. Capital flow less capital expenditures was also strong at $53,000,000 that's an increase of roughly 112% from last year.
Over the last four quarters, we've generated $317,000,000 in free cash flow. Given our ratable revenue model and the fact that roughly 2 thirds of invoiced dollars are for 12 month durations, we believe the cash flow is an important measure of our operating equivalents overall including marketable securities finished the quarter at approximately $1,800,000,000 Deferred revenue rose by approximately 27 percent year over year to finish the quarter at $695,000,000 We had a small headwind on deferred revenue approximately $2,000,000 on a year over year comparison basis. This was our 5th consecutive quarter of improving deferred revenue growth, reflecting strong new business, reduced attrition and continued stability in invoicing durations. On a sequential basis, deferred revenue rose by approximately 11 $1,000,000 in dollar terms, but was flat in constant currency terms. Looking to the 4th quarter, we expect deferred revenue to grow at just a slightly slower rate year over year than in Q3.
Let me close with our outlook. As we enter Q4, demand for our products continues to be strong. I've already mentioned Dreamforce, ramp commission and bonus plans and aggressive hiring are some of the reasons why operating income in the Q4 will be slightly lower than in Q3. With that context, we expect 4th quarter revenue to be in the range of approximately $447,000,000 to $449,000,000 and project non GAAP Mark indicated, we currently anticipate revenue to be in the range of $1,970,000,000 to $2,000,000,000 It's important to note that we'll be adopting the new revenue recognition standard EITF-eighty one which we estimate will increase next year's revenue by approximately $20,000,000 This extra amount is included in our guidance range. Clearly, growth is still our number one priority and so you should expect us to continue ramping our investments in distribution capacity, data centers and product development to achieve our aggressive goals.
Before I close, I'd like to remind everyone that the key day at Dreamforce for analysts is Tuesday, December 7th in addition to Mark's opening keynote, analysts invited to VIP luncheon and CEO Q and A session. And then later that afternoon, David and I will be hosting another session to review our business model and some of the key metrics that drive our business. If you haven't already done so, you can register on our website or contact Investor Relations directly. With that, let me thank you all for joining us today. And I'd like to open up the call for questions.
Operator?
Give me some comments on what you're seeing in Japan. It's been called out by a number of tech companies as an area of weakness, but judging by your performance, sales force is not
Japan market. It's been a very exciting market for us. We're really strongly working to build a $1,000,000,000 business in Japan. That's our goal. It's obviously a long term goal for the company.
And we believe we have enough evidence at this point that we can get there. The business is so strong that we decided to acquire the stock from our Japanese partner Sunbridge and to focus on having a wholly owned subsidiary. That's been very important to us. We believe that will give us strategic strength. I can tell you that I was just there and our relationships with the most important companies in Japan have really never been stronger.
Everyone is very excited that we're building a data center jointly with NTT. We've been advertising that in the Nikkei and been getting some great response. And we really see the Japanese market as just a tremendous opportunity on a going forward basis. And you probably noticed a number of really powerful and important Japanese names in my script today. I've never been more excited about the Japanese cloud computing market.
Next question please.
Our next question comes from the line of Heather Bellini with ISI Group.
Hi, good afternoon guys. Two questions for you. 1, I just did I hear right that you you expect cash flow growth to be a few points less than revenue growth due to payments? I just want to make sure I heard it right.
Yes, yes.
Just a couple of points, just slightly slower than revenue growth in the Q4, yes.
Okay. And then since David that was a quick one, the only thing I'm going to ask is what the impact was of buying in the Japanese JV to your top line guidance for Q4 if at all?
Sneaky Heather, Sneaky. To top line guidance. We'd always consolidated 100% of their revenue. It was more the minority interest accounting that went on down at the bottom of the income statement. So no change to revenue in Q4 or next year.
Next question please.
Our next question comes from the line of Mark Murphy with Piper Jaffray.
Yes, thank you. Mark, I was wondering if you would ever consider offering a stripped down version of Chatter just to be able to position against some of the low end end competitive offerings in the marketplace or perhaps even a free version of chatter to drive adoption into some different segments?
Well, the answer to both of those is yes. We're working on a free version of Chatter that will be a kind of a virally based product and we'll introduce that to our customers at Dreamforce. Some of our customers already have that that product, and that's very exciting for us. We've been testing kind of making chatter more viral by giving our customers the ability to send viral invites. One of the things for us is that our customers need to assign their email domain to the service and then the admin needs to turn on this kind of viral invite capability, but that's very exciting for us.
And so this will be a new kind of exactly what you said stripped down version of Chatter, but it will operate within our existing customer network. So if you're a customer, you'll be able to email and send viral invites to other customers. And this, I think, will be just a tremendous accelerator for Chatter, and we plan to turn that on for all customers shortly. And 2, we will have a kind of free independent service that's kind of a viral service that we'll mostly use as lead gen and for getting customers to upsell called chatter.com and we plan to launch that in the Q1 and that will be very exciting for us and for all of our customers. And as we start to work on that chatter.com concept, that will have a lot of the kind of look and flavor that you can see of the traditional enterprise social networking sites.
We're already a lot bigger than them, as you know. But the big
Our next question comes from the line of Adam Holt with Morgan Stanley.
Great. Thank you. The chatter numbers are pretty stunning, 70% penetration this quickly. Could you talk a little bit about what you think the impact to revenue was in the quarter? And from here, how you see the revenue story unfolding given how high penetration is?
The revenue impact from Chatter has really been not material because we don't charge customers to turn chatter on. And the fundamental expansion deals that we're getting for chatter against the huge revenue numbers of the Sales Cloud and service cloud and custom cloud just are basically very small against that. So the power for chatter remains number 1, it's driving tremendous adoption. It's making us much stickier. It's making us much more efficient inside our customers.
And because of that, we think it's strategic for us. It's not just a tactical product. It's strategic in that it really is kind of the next wave of computing and that we've talked about the mobility and the social aspects and the real time aspects of computing the chatter offers, but it's strategic for us because of how it impacts our customers usage of our product just goes way up. And also it drives their some of their other products down like email. So that's why we're investing in chatter.
You've seen us talk about the $15 chatter product, is kind of this enterprise expansion product that we've been using to kind of do these Chatter only deals. I just mentioned we'll work on a Chatter free product, which will be stripped down even farther from there, which will be virally oriented. And then we'll have Chatter dotcom, which will be this kind of free service. And the fundamental reason is that we really think that we found something that customers want and that makes us stronger in our existing customers. Just look at Dell.
So with Dell, we of course had our 30,000 or 40,000 or 50,000 users or whatever it was in Dell than all the sales and marketing users. But Michael Dell really got excited and into Chatter and was using it himself and then said let's roll this thing out and really within a couple of weeks we were able to turn on now almost 100,000 users of chatter inside Dell and they've a very large enterprise social network. The power of that really came from that there was several situations where they just got
tremendous business value from the service.
And we see that happening with a lot continue to take a lot of evangelism. It's going to continue to take a lot of education. This is a relatively new product. It's only been live for a couple of quarters. And you're going to a lot of exciting new features of Chatter when we get to Dreamforce.
You're going to see things happening in the feed that you've just never seen happen in a feed with any other product before. It's pretty incredible.
Next question please.
Our next question
comes from the
line of Kash Rangan with Merrill Lynch. Thank you very much. Mark, I'm just wondering if you can talk to sales productivity trends that are that you're stepping up hiring whatnot, but as you
look at the performance of sales people that have come on board in the last 4 or 5 years, are you
seeing a trend tenure productivity that would suggest that the people that you're bringing on board could turn productive even faster than
the folks that you brought on board in the last 4
or 5 years? Just to get a
sense for how quickly the revenue growth could ramp as you bring these people on board? That's it for me. Thanks.
Well, Kash, I can't tell you the exact how quickly all of that, but I can refer you back to our earnings calls in fiscal year 'nine when we really talked about how we were expanding our sales organization very aggressively. But then you probably remember in fiscal year 'ten, we really didn't do that. That was not our big focus because of the global recession. Now as we get ready to complete fiscal year 2011, we're coming into the 4th quarter. We've been turning on the sales growth very aggressively around the world this entire fiscal year.
And when that will actually pay off, whether that will be in fiscal year 2012 or fiscal year 2013, I can't exactly tell you. But we're very bullish on our business. And while we really didn't hire any salespeople of consequence in fiscal year 'ten because we're so worried about the general state of the world. In fiscal year 'eleven, we've had a lot of confidence and we've really ramped up in anticipation of fiscal year 2012 which is why we feel good about giving you this guidance of $1,970,000,000 to 2 $1,000,000,000 As you know cash that will make salesforce.com the 1st enterprise cloud computing company to deliver 2 $1,000,000,000 in revenue which is our dream, our goal, our vision for fiscal year 2012. And aggressive sales hiring that we've done this year, we hope will pay off for that for next year, which is why we feel good enough already to deliver that guidance to you today.
Next question, please.
Our next question comes from the line of Tom Ernst with Deutsche Bank.
Hey guys, it's actually Stan Slosky sitting in for Tom. Thank you very much for taking question. So you mentioned you had lower attrition and I just wanted to get a better understanding of what's driving the lower attrition and how much of that is related to chatter and Jigsaw? I know you mentioned you have better economic conditions, but aside from the economics, chatter how much are they helping?
Thank you.
Well, as you know, our attrition did spike as the recession got really bad and we hit what we think was a ceiling level when essentially the world collapsed. And since then we of course have put in a number of things that we call measures for customer for life, our processes and controls around that. But the number one thing that has happened that has reduced the attrition is the economy is not going off the cliff. So because of that, we feel that our attrition has been dropping and it's been dropping very consistently since fiscal year 'ten completed and now we're in fiscal year 'eleven in Q3. So, we feel the number one driver around attrition has been the economy.
Now, yes, we're definitely finding some great tools, contractual tools, technology tools and even human processes to help reduce attrition and having customers for life is a critical part of our business. We're all about adoption and customer success. Nothing is more important than the trusted customer success of every single one of our customers at salesforce.com. It's our most important value most important thing, it remains very dependent on the economy. So I hope that answers your question.
Next question please.
Our next question comes from the line of Laura Letterman with William Blair.
Yes. Thank you for taking my questions. Following up on chatter when you're seeing these extensions beyond existing seat holders getting chatter turned on, what is it replacing? Is it net new? Is it replacing largely other social tools like a Adele?
Or is it replacing SharePoint or Lotus Notes? Kind of where do you see it going today? Where have you seen it going so far?
Well, Laura, it's really in all three of those areas and I appreciate the question because I do think this is probably one of the most exciting I've really ever been associated with. And of course you look at products like Lotus Notes and we've talked about this before, it's a product that was conceived of before Mark Zuckerberg, the founder of Facebook was. And the reality is that it's not a humorous joke. These customers have been running this coming into these productivity applications that they have in their customers and these customers and they're saying, I don't know how to use this. This is not how I work.
Where's my iPad? Where's my iPhone? Where's my BlackBerry? Where's my graphical user interfaces? And they're like, well, this is graphical users.
Interface and they're like, this is Windows and it's just junk. And that's what Lotus Notes is honestly. It was a great product at the time. IBM has done a terrible job in terms of keeping it fresh. Just look at the terrible job IBM has done with their fundamentally their software strategy, they've had to move to an acquisition strategy because they've let these kind of core franchises erode.
They turned them into cows and now they're getting trampled by these next generation products. And I think SharePoint is very much the same thing. It's kind of the grandmother's attic. These customers throw everything into it and then they can't find it and they don't know what's up there and they don't know how to get it out. And it's kind of it's a joke.
It becomes their Internet
and employees are stifled.
But when they get in these dynamic a great new model of doing business. And the power of that, Laura, is that there are some great ones out there, but none of them is as good as chatter because we're integrated with the data. So those transactions happen around your business content gets refreshed or sales transactions are closed, orders change, that the social network is updating you on the transactions and the fundamental things in the business that you're following. If you're following customer service inquiries, accounts, contacts, opportunities, bill of materials, marketing, competitive analysis, groups, collaborations that as those things change, damn, you're getting that update. That's very powerful.
And Lotus Notes and SharePoint just don't do it. So you're going to see even more exciting things than that at Dreamforce. So I'll see you there.
Our next question comes from the line of Brad Zelnick with Macquarie.
Thanks. Good afternoon, guys. Mark, when we think about VM Force and how explosive it can be in driving custom app development and attracting ISVs to the platform. Is there anything else in sales force history that you can compare it to in terms of the timeframe and rate at which we can see it impact your win rates, perhaps net price proceed or ultimately your financials?
Well, we had a pretty big breakthrough in looking at our platform this year and what we really saw was that our database and if you go to trust. Salesforce dotcom you'll see our database is really widely used and aggressively used by our customers. You'll see where there's it's going to happen where I'm going to be talking about, I don't know, 500,000,000 transactions a day pretty soon coming up on how many database transactions we're completing for customers and I mentioned that was between 459s of reliability and at 300 milliseconds and we've done incredible things in the database and the release of Apex with stored procedures and triggers and making the database so useful. Now the database has been very tightly integrated as you know with our user interface environment or what we call force.com or Visualforce and the break database is so powerful. What if we were to uncouple it and that was really the breakthrough where we said now we can have the in force because now that we've uncoupled the database, let's put job on top of the in force so that customers don't want to use our UI environment which is excellent, but they want to use Java which is also excellent that they have freedom of choice.
And that's what VMFORCE is. It lets customers build in a Java IDE like Spring from VMware and run that Java code right on our database. And now that we've been doing that, we've been saying, gee, how do we get all these languages running on of our database? How do we get all of these mobile devices running on top of our database? And as you see us at the Dreamforce, you're going to see these visions that we've been talking about this year start to come to manifestation because we think the next generation of platform of service is exactly that.
It's the VM Force model, this highly productive commodity language with very robust cloud based services from Salesforce that we're the only ones who are really doing that in the world at this transaction levels. And we think we're going to try to hyper drive our force.com environment in VM Force and Dreamforce. So you're going to see some of it at cloudstock on December 6 and then you're going to really see it in our keynote on December 7 December 8 we're going to do an extensive review of how we're going to supercharge that platform as a service because we really think the time is really right for that. All right, operator, we have time for,
it looks like one more question. So let's take our last question of the day.
Our last question comes from the line of Brent Thill with UBS.
Thanks. Mark, you mentioned Yahoo! Is a standalone collaboration customer. I guess going forward, I know you mentioned that it wasn't material to revenue this quarter, but going forward, could we see chatter becoming a meaningful standalone opportunity in the future?
I think so. I think it's a tremendous opportunity. And I'll tell you that in accounts like that and accounts and others where we have not been the CRM standard that it really opens the door for us to become that because it's really opening the doors to a lot of great new businesses for us because don't forget, Brett, the key to chatter is that deeply integrated as you know with our sales and service clouds and our force.com system. So the power of chatter is that once it gets in there then we can say well you can turn this on, you can turn that on, you can turn on opportunities, you can turn on content, you can turn on contacts, you can turn on cases, you can turn on knowledge management, you can turn on all these things in it, you can turn on analytics and dashboards and as you turn these things on your feeds become more valuable to you.
And this is our strategy Brett, which is to make
those feeds indispensable. Now, that I can't separate myself from it. It's so powerful. I have it on my BlackBerry. I have it on my iPad, my iPhone, and I have it on my we've released desktop app for it now that runs on PC and Macintosh built in Adobe Flash and Air.
And we have a native Android product under development and the robustness of the feed. It's not just that the feed is full of human communication of 1 person talking the other, which was kind of the 1st generation like we have in Facebook. But just as Facebook has shown when they added the photos sharing app that if you can get more and more data and for us it's all about business transactions and workflow that we can really transform a business and give them more transparency and more help CEOs like Michael Dell, I mentioned become more aligned with the organization. And this is our goal. And he obviously had a great quarter today and I don't know if sales force chatter has something to do with that.
But our goal is to make our customers successful, keep them focused, motivated, help them keep their employees communicating and there's no better tool to do that than Salesforce Chatter.
Before we sign off today, I'd like to remind everyone to attend Dreamforce, still plenty of time to register, it's December 6 9 here in San Francisco, the primary date for analysts. As Graham mentioned is 7th, that will include a keynote for Mark of VIP Luncheon, Q and A session with Mark and some of the senior execs as well as the analyst session that Graham and I will host later in the day. Analysts are provided a complimentary pass of the event and can register at our website using the financial analyst registration button. We look forward to seeing you all in San Francisco in 2 weeks. Thanks for joining us today and have a great day.
Bye bye now.
This concludes today's conference call. You may now