CurrentOfferings.com Story:

Demand flagging for Salesforce?

By David Shabelman, The Deal, April 21, 2004

Once seen as one of the hottest technology offerings this side of Google Inc., Salesforce.com Inc. is looking to temper expectations.

The San Francisco customer relationship management software company disclosed this week it hopes to raise $70.7 million in an initial public offering, significantly less than the $115 million it forecast in December. Salesforce.com also said it expects to sell 10 million shares for $7.50 to $8.50 each, less than it originally planned.

"When they come back with a price reduction like that, it usually shows there's less than heated demand for the deal," said Ben Holmes, principal at Prot�g� Funds LLC in Boulder, Colo.

Salesforce.com makes software that allows businesses to share customer information over the Internet. It differs from traditional software companies in that customers pay a monthly subscription price for software rather than hefty up-front costs. The company has 140,000 subscribers.

The soft pricing for Salesforce.com is unusual for an issue led by industry powerhouse Morgan Stanley. Pricing Salesforce.com at $8 per share or less would make it the investment bank's lowest IPO pricing since biotech company Sugen Inc.'s public debut in 1994, said Richard Peterson, chief market strategist with Thomson Financial.

"It's quite a low range for a Morgan Stanley deal," said Jeffrey Hirschkorn, senior analyst with Current Offerings Inc. "A typical Morgan Stanley deal is $10 to $12."

Salesforce.com representatives declined comment, citing quiet-period restrictions. Morgan Stanley also declined comment.

Morgan Stanley, which is leading the issue, on Wednesday increased the size of the offering to 11 million shares from 10 million. Co-underwriters of the Salesforce.com offering include Deutsche Bank Securities Inc., UBS Securities LLC, Wachovia Capital Markets LLC and William Blair & Co. LLC.