Decline in Salesforce's Deferred Revenues Gives Pause; Maintaining Hold

5/22 - "We advise investors to wait for a better entry point before buying CRM shares. We are primarily concerned with CRM’s valuation, although we have concerns regarding the macro-economic environment as well."

"We do not know if the sequential decline in deferred revenue reflects increasing seasonality or a potential deterioration in the business....deferred revenue declined sequentially for the first time since CY 2002. We have previously written that for subscription vendors, Q1 revenue could stem from implementations of bookings signed as far back as Q1/Q2 2007, with Q2 guidance stemming from deals booked as late as calendar Q4 2007. For this reason, we are more concerned with lower than expected deferred revenue than pleased with revenue upside in the quarter and increased Q2 revenue guidance."

"Increasing 2009 revenue and EPS estimates to $1.080B and $0.37 from $1.050B and $0.34 due to Q1 results and increased guidance. Increasing 2010 revenue and EPS estimates to $1.430B and $0.70 from $1.400B and $0.68 for the same reason...Reiterate HOLD and increasing target to $61 from $60. Our new price target reflects
an EV/Subscription Revenue multiple of 7.0x our 2009 subscription revenue estimate, at the top-end of the valuation range of subscription vendors, and in-line with its peers."