Marc Benioff - Chief Executive Officer, Chairman Steven Cakebread - Chief Financial Officer David Havlek - Vice President of Investor Relations

Greg Dunham - Deutsche Bank Laura Lederman - William Blair Jason Maynard - Credit Suisse Chris Sailer - Goldman Sachs Brent Hill - Citigroup Kash Rangan - Merrill Lynch Matthew Dawson - Pacific Crest Securities Peter Goldmacher - Cowen Michael Huang - Thinkequity Mark Murphy - First Albany Abhey Lamba - UBS

Good afternoon, my name is Cassidy and I will be your conference operator today. At this time, I would like to welcome everyone to the salesforce.com Quarter 1 2007 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press star, then the number 2 on your telephone keypad. Thank you. I will now turn the call over to David Havlek, Vice President of Investor Relations. You may begin your conference, sir.

Thank you, Operator. Welcome, everyone, to salesforce.com's first quarter fiscal year 2007 financial results conference call. Joining me today are CEO and Chairman, Marc Benioff, and CFO, Steve Cakebread. Marc will begin today's discussion with a brief review of our outstanding first quarter, and then update you on some of our key initiatives and achievements during the quarter. Steve will follow with a detailed discussion of results before discussing our updated outlook. Following their prepared remarks, we will open things up to all of you for Q&A. Before we get started today, let me briefly address a couple of formalities. First, in order to provide a better understanding of our business, we will reference certain non-GAAP measures during today's call. A reconciliation of GAAP and non-GAAP results is available in the earnings press release issued earlier today, and filed on form 8K with the SEC. The press release contains a complete review of our financial performance for the first quarter. Additional financial information beyond what is provided in the press release may be found on our website. Second, today's call is being webcast and a replay will be available shortly following the conclusion of the call through Friday, June 2. To access the press release, the financial detail, or the webcast replay, please consult our Investor Relations website at www.salesforce.com/investor. Before I turn it over to Marc, please be reminded that the primary focus of today's call is to provide you with information regarding our first-quarter fiscal year 2007 performance. However, some of our discussion or responses to your questions will contain forward-looking statements. These statements may include projected financial results, subscriber financial and operating metrics, business strategy, the timing of future services, product or platform releases and their capabilities, demand for on-demand services generally or for our products, services or the AppExchange specifically, anticipated growth, market opportunities, expected implementation of our services by certain customers' datacenter, hardware or software initiatives, future system and service availability, the decline of the enterprise application market or other business-related topics. These statements are subject to risks, uncertainties and assumptions. Should any of these risks or uncertainties materialize, or should our assumptions prove to be incorrect, actual company results could differ materially from these forward-looking statements. 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 form 10K for our recently ended fiscal year 2006, and to January 31, 2006. The 10K is available on our IR website. Finally, please be reminded that any unreleased services or features referenced in today's discussion or other public statements are not currently available and may not be delivered on time, or at all. Customers who purchase our services should make the purchase decisions based upon features that are currently available. With that, let me turn the call over to Marc.

Thank you, David. First, let me congratulate all of our employees on creating the first on-demand business services company to exceed $100 million in revenue for a quarter. There are several important milestones in a company's history and an industry's history, and this quarter of greater than $100 million is simply one of the most important of them. Our revenue for the first quarter was $104.7 million, exceeding the guidance we provided last quarter, up 63% from the first quarter of last year, and up 15% from our last quarter. This was an amazing performance when you consider that it was just a little more than two years ago that we were approaching our first $100 million year. Now, we have exceeded our first $100 million quarter. This quarter is the culmination of our command of the on-demand market that we began creating over seven years ago, the pioneering technology that we have delivered, and our unprecedented level of customer success in the business software market -- a market that is traditionally known more for its implementation failures than widespread customer success. Fully diluted non-GAAP EPS was $0.04 for the quarter. This result excludes the effect of stock-based compensation and the amortization of purchased intangibles related to our Sendia acquisition, and was above our prior outlook. Net cash from operations totaled roughly $12.4 million for the quarter, and we exited the quarter with roughly $300 million in cash and equivalents. Salesforce.com is pioneering the next generation of enterprise software, now known widely as on-demand computing or software service. We believe the traditional enterprise software model of shipping software in a CD-ROM to customers, having them install it and then integrate it with a myriad of software and hardware necessary to make it run, and then upgrade and update it through self-maintenance, has come to an end. The future of enterprise software will be delivered as a multi-tenant, shared service, similar to how eBay and Amazon.com have built their consumer Internet services. Through the use of many of the technologies pioneered by these companies and others, we believe that enterprises will be able to rely on a set of heterogeneous web services to automate their businesses, at a far lower cost and with greater ease-of-use than ever before. It will not be for just small and medium-sized businesses, but the largest companies in the world as well will find that this model is more likely to make them successful than the previous generation of enterprise software technology. This fact alone is driving our entire industry away from software and towards a future of web services. Our flagship application, Salesforce, offers a complete customer relationship management service on-demand, regardless of scale of implementation from one user to thousands of users, regardless of the level of customization, whether it is changing every tab and field name, or creating one from scratch, and regardless of integration requirements. Whether they are for the desktop or enterprise ERP system, salesforce.com has become one of the most successful CRM services ever developed and deployed. Declaring our service as one of the easiest to use business offerings, BusinessWeek, in a May 3rd article, titled “The Friendly Face of Business Software”, said: “The actual users will tell you, programs like those offered by salesforce.com may be the first truly intuitive pieces of business software they have ever used.” BusinessWeek went on to say: “To really appreciate the change, consider just how frustrated the buyers of business software had been. Companies spent buckets of money in up-front costs, and then more dough getting that software to work. Even more galling for tech managers is the reality that a lot of people outside of, say, the accounting department, never bother to use the products because they’re too geeky and complicated.” Salesforce.com's pioneering use and on-demand approach, coupled with the flexibility of our underlying AppExchange platform for customization and integration, has made Salesforce and the CRM offering that we offer the place and the product to beat in enterprise software today. Salesforce is built on a revolutionary new service-based operating system called AppExchange, that has been called the eBay of enterprise software. The AppExchange has created a whole new business and technology model for partners and ISV’s to build and sell on-demand applications. InfoWorld, in a March 20th article called “Software Service: the Next Big Thing” said: “If any one venture stands squarely at the intersection of wild Web 2.0 mash-ups and more conventional software-service operating systems, it is Salesforce.com’s AppExchange.” The AppExchange is the first platform to offer hundreds -- and we soon hope thousands -- of on-demand applications that span a multitude of industries, geographies, and languages. It allows customers to extend Salesforce with a variety of extensions from companies like One Source and Harte-Hanks, and Google, and also introduces new applications to industries such as real estate, human resources, project management, manufacturing, from a variety of established ISV’s and start-ups. We have seen a tremendous level of creativity and excitement across the globe from Japan to India to here in the United States, and it is only just beginning for the AppExchange. Of last count, there were 214 applications on the AppExchange, and the numbers are growing every day. Since the AppExchange went live in January, our customers have installed more than 8,600 applications. This not only makes salesforce.com more pervasive throughout our customers' operations, but more strategic to them as a total information management platform as well. This quarter, we also introduced AppExchange Mobile via our acquisition of Sendia in April, which allows our customers to deploy many of our AppExchange applications to virtually any device, including many mobile devices. This new write-once, run-anywhere capability allows our customers to fully deploy their applications to the PC browser or wireless device of their choice, including the popular BlackBerry. We have already provisioned more than 5,000 subscribers on AppExchange Mobile in its first few weeks. Next week, on May 24th, we will be hosting our first ever AppForce conference here in San Francisco at the Sheraton Palace Hotel -- the AppExchange User and Developer Conference. The focus of the event will be to show partners, customers and developers how to build, publish and sell applications on the AppExchange. We will also have a large group of venture capitalists at the event, because they now see the AppExchange as the emerging on-demand platform of choice. Over 50 ISV’s are scheduled to display AppExchange applications. Today, salesforce.com has over 22,700 customers, an increase of 2,200 customers from our previous quarter, and the largest number of customers added in any quarter in our history. These customers represent 444,000 subscribers -- a 45,000 subscriber increase from our record-setting fourth quarter, and an increase of 177,000 subscribers from the first quarter last year. These customers range from the largest CRM deployments in the largest companies in the world, to departments and divisions of the most successful enterprises, to medium-sized companies, and even small startups. In fact, Cisco Systems this quarter significantly expanded its subscribers with salesforce.com from 4,500 subscribers to 7,500 subscribers, making it our largest customer. Other large customers include: In fact, salesforce.com has nearly 100 customers with more than 500 subscribers, and 26 customers with over 1,000 subscribers. During the quarter, salesforce.com signed an agreement with Citrix Systems to replace their unsuccessful SAP-CRM implementation, after successfully piloting 200 salesforce.com users in their online and gateway divisions. The total implementation will be over 1,200 users fully integrated with Citrix's SAP-ERP system using our new unlimited edition. Salesforce.com also beat SAP at FileNet to replace their unsuccessful Siebel implementation, with 700 users on salesforce.com, fully integrated with their SAP-ERP system, also using our new unlimited edition service. Also, this quarter, DuPont renewed their 500 subscribers with salesforce.com to be fully integrated with their SAP-ERP system as well. Our expansions into SAP's customer base includes implementations at: We will make an exciting announcement regarding new capabilities for integrating with SAP implementations, and further replacing SAP's unsuccessful CRM offering at our AppForce: AppExchange User and Developer Conference, on May 24th. Customer deployments into complex environments like Cisco take time, as evidenced by their continued expansion with salesforce.com, but the growth at Cisco, ADP, and other large accounts in recent quarters is evidence that the world's largest enterprises are increasingly embracing on-demand technology and services to run their businesses. We are excited to announce several new wins this quarter within a variety of enterprises. Within the financial services market, we won large deployments at ABN AMRO and eTrade, who together will be adding more than 1,250 subscribers to salesforce.com. In addition, we won opportunities at Dun & Bradstreet, Genentech, Semtex, and PayChex during the quarter. Last quarter, I highlighted our strength in the media industry. Our wins this quarter at ABN AMRO and E*Trade emphasize our continued strength in the financial services markets, where our customers now include Merrill Lynch, Morgan Stanley, Deutsche Bank, Wachovia, SunTrust, CIC, Aon, ADP, Schroders, Société Générale, Shinsei, [Mysouo], Citizens Bank, Allianz, AmeriCredit, TB Ameritrade, and IFC -- the private finance arm of the World Bank. Financial services has become one of salesforce.com's strongest industries. It is amazing when you consider that the financial services industry, prior to on-demand, was rarely successful with traditional enterprise software technologies. This quarter, we released our new premium service -- Unlimited Edition. Unlimited Edition is a new bundled offering that not only gives customers the ability to have unlimited applications using our AppExchange service, but bundles many of our a la carte offerings as well. Many of our new customers prefer unlimited edition, because it gives them a total technology and service solution. Of course, it is our premium offering, with a list price of $195 per user, per month. We believe that this new offering, which bundles in new products, such as our Sandbox and AppExchange mobile offerings, will become the preferred choice for both prospects as well as existing customers. This quarter, we saw this focus on value creation begin to materialize in our financial results. As customers use and deploy our solutions to manage more of their business information every day, we will see the company benefit in two ways -- upgrades to Unlimited Edition, and add-on purchase activities of these new products individually. As you know, Unlimited Edition is complemented by our other editions -- Team Edition, Professional Edition, and Enterprise Edition. Typically, we see customers start with a lower-featured edition of our service, deployed only to a subset of their organization. As they experience success with the technology, they expand the number of users, as well as increase the level of value they want from the service. As I mentioned earlier, Citrix and FileNet chose Unlimited Edition for their enterprise rollouts. We also saw FedEx, Kinko's, Chevron, and Optima choose Unlimited Edition as well. While the benefits of Unlimited Edition are clear to large, enterprise accounts like these, we are also seeing strong interest in Unlimited Edition by customers of all sizes: large, medium, and small. After less than a quarter since its launch, total unlimited subscriber count, across all customers, is already nearing 4,000. Customer response to our Sandbox test environment product launched last year has been fabulous. Sandbox provides customers with an exact clone of their salesforce.com or AppExchange deployment, complete with actual data, configurations and customizations. This is a huge value creator for customers who want to test modifications, changes or customizations in their environment without disrupting their daily business operations. During the quarter, Kaiser, CIT, Symbol Technologies, and Business Objects -- representing a total of more than 6,000 subscribers -- purchased and deployed Sandbox into their existing salesforce.com environment. In total, there are currently more than 25,000 subscribers enjoying the benefits of Sandbox, and it has been just five months since we announced the product. During the quarter, we delivered nearly 2.6 billion transactions to our customers, at approximately 99.9% reliability, making salesforce.com one of the largest and most reliable enterprise systems available today. While subscribers have grown 65% since last year, our transaction volumes have grown even more rapidly, up roughly 112% from Q1 of last year. The explosive growth in usage is very important, because it not only shows that customers are finding great value in our products and services but they are finding new and innovative ways every day to share and manage information using the salesforce.com and AppExchange platforms. API traffic is growing even more quickly, up roughly 186% from last year, to roughly 45% of total transactions. This demonstrates a couple of very important things. First, customers are increasingly integrating our application into their existing enterprise ERP environments. Second, this indicates to us that the era of the business web has arrived, and salesforce.com's AppExchange platform is increasingly being the model of choice for delivery to seamlessly-integrated web services-based solutions and match-ups. Our system performance for handling these transactions has never been better. Our transaction speed for the quarter averaged just 288 milliseconds. That means that we have reduced transaction times by more than a third since Q1 of last year, even as we were growing transaction volumes by more than 100%. The IT investments we made last fiscal year, combined with the improved performance of our winter '06 release, are really starting to show in our system performance. On the reliability front, Q1 was an outstanding quarter. After a few challenging days in the fourth quarter, and specifically in January, our availability returned to its excellent historical levels in the first quarter. Outstanding capacity, lightning fast transaction speed and unmatched availability -- it is a tough act to match for any of our competitors, and we are confident enough to publish our performance every day at http://trust.salesforce.com. We are the only on-demand provider to provide this transparency by server in real-time and historically. Finally, I am pleased to inform you that salesforce.com has been chosen as number 7 out of the top 100 Best Corporate Citizens by Business Ethics Magazine. On April 28, we were chosen by Taproot Foundation as one of the winners of their 2006 Pro Bono Award, for making an impact in the communities we serve by leveraging the skills of our employees. Our pioneering software service model is complemented by our pioneering work with our one-one-one model -- 1% of our time, 1% of our profits, and 1% of our equity is managed through Salesforce Foundation. We now run over 900 non-profits for free on Salesforce and AppExchange, including the United Way, who has managed the Katrina relief efforts on our services. We are delighted to be recognized for this important work. You can find out more information about Salesforce Foundation at SalesforceFoundation.org. Our first quarter was a milestone quarter. Our financial performance was outstanding. Our customer additions were excellent, and we continue to deliver on our vision of the future of software. With that, now let me turn things over to our Chief Financial Officer, Steve Cakebread.

Thanks, Marc, and good afternoon, everyone. Let me begin my comments today with some of the financial highlights from our fiscal first quarter. The majority of my commentary will be non-GAAP, but let me quickly reconcile our GAAP and non-GAAP results. I want you to keep in mind our GAAP results in Q1 2006 have only $800,000 in stock-based compensation costs, while in Q1 of fiscal year 2007, it includes $7.6 million of stock-based charges. On a non-GAAP basis for Q1, we reported operating income of $7.6 million, an increase of 25% from Q4, and up 56% from Q1 of last year. Non-GAAP income rose 12% sequentially to $5 million, an increase of 3% from last year. Again, it is important to note that our non-GAAP results this quarter reflect a tax rate of 45%. That is up from 20% last year. In addition, these results exclude roughly $7.6 million in stock-based compensation expenses, and roughly $89,000 in amortization of purchased intangibles related to our acquisition of Sendia. When you include these expenses and their related tax benefits, our reported GAAP loss was roughly $229,000, or break-even on an EPS basis. Now, on to our full P&L. Revenue for the quarter was an outstanding $104.7 million. This is up 15% from the fourth quarter and 63% from a year-ago quarter. Geographically, Q1 revenue in the Americas grew 63% from a year-ago quarter to $83 million. This represents 15% sequential growth. In Europe, revenue of $15 million was up 59% from last year, and 17% from Q4. If you look at this in constant currency terms, growth in Europe was 71% from last year and 14% from the prior quarter. In Asia-Pacific, revenue grew 73% from last year to $6.7 million, an increase of 14% sequentially from Q4. Again, in constant currency, revenue in Asia grew 85% year on year, and 13% from Q4 of this year. Subscription and support revenue grew 15% sequentially and 62% year over year, to end the quarter at $94.5 million. This remarkable performance was driven by our recent strong subscriber additions and an increase in ASP’s. Our subscriber total grew by 45,000 during the quarter, bringing the total subscriber count to 444,000, an increase of 66% from a year ago. In addition, our subscriber growth ASP’s also increased. Calculating ending subscriber revenue over ending subscriber count, our ASP grew sequentially from roughly $69 last quarter to roughly $71 in Q1. That is why I have been focused on creating incremental opportunities by continuing to launch innovative products like AppExchange, Sandbox, UE and AppExchange Mobile. To wrap up my top-line discussion, professional services revenue grew by 70% from last year, to finish the quarter at $10.2 million. As expected, this growth was essentially in line with our subscriptions business. Now on to the rest of the P&L. Overall non-GAAP gross margin for the company was 78% for Q1, up 1 point from Q4, but down 4 points from last year. However, this result remains well within our target range of the high 70’s to low 80’s for gross margins. Non-GAAP subscription and support gross margins ended at 87%, essentially flat from Q4 and also down 4 points from last year. As we discussed with you in the past, we have increased our IT delivery spending during the quarter to ensure that our delivery is the best in the industry. We believe these investments are essential to the long-term success of our business and the remarkable availability that Marc discussed earlier. Non-GAAP professional services gross margins remain negative for the quarter, although they did show some improvement from Q4. In the near-term, we continue to view these losses as investments in our overall company growth. Non-GAAP operating expenses were well managed during the quarter, finishing at 70% of revenue, roughly flat from Q4, but a full 4 points lower than last year. While we continue to add more R&D to support our platform and expand our product features, R&D as a percentage of revenue remained essentially flat quarter to quarter, ending at 8%. At this level, our R&D is well within our targeted range and well below that of traditional enterprise software companies. G&A as a percentage of revenue was also essentially unchanged quarter to quarter, ending at 16% of revenue. Finally, sales and marketing expenses as a percentage of revenue remained flat from Q4 at 46%. Again, those are all non-GAAP numbers, excluding almost $6.5 million of stock-based compensations for Q1. Let's move on to headcount. We ended the quarter at 1,480 full-time employees, up 176 from where we began the quarter, and up more than 600 from a year ago. In addition to the 30 people that joined salesforce.com as part of the Sendia acquisition, we continue to hire across organizationally in sales and infrastructure positions necessary to support our growth. Our headcount growth in Q1 represents almost three new employees for every business day during the quarter. We have done a great job of recruiting, hiring and assimilating new employees into the organization, while maintaining our focus on our business performance. Looking ahead, we are aggressively hiring sales capacity to support our ambitious long-term growth expectations. With regard to cash flow on the balance sheet, our operating model continues to generate a lot of cash. Our operating cash performance this quarter declined somewhat, finishing at $12.4 million, but this is primarily the result of our strong fiscal year '06, which ended in January. Let me just describe this for a minute. First, sales commission payments in Q1 for Q4 performance were at the highest levels of the year, and not just because of our strong finish in Q4, but because our commission accelerators in Q4 are rather material. Second, based on our overall company financial performance, employees were paid year-end bonuses this quarter. Third, because of FAS 123R, the tax benefits associated with the stock-based compensation are no longer reported in operating cash, but instead appear in the financing section of the cash statement. This impact alone resulted in a reduction of operating cash at $2.6 million. Finally, as I have mentioned many times in the past, the timing of payables and receivables really affects our cash performance quarter to quarter. In Q4, we benefited from some of these timing effects, while in Q1 there was a draw-down of the payables, which pressured our cash number. Given all these effects, I am very pleased with our cash management during the quarter, and fully expect our excellent cash performance to continue. Today, total cash, cash equivalents and marketable securities finish the quarter at $298 million. That is essentially flat from Q4, but offsetting our operating cash generation this quarter was a $15 million cash acquisition of Sendia. Nonetheless, we exit Q1 with cash balances roughly $80 million higher than Q1 of last year. Deferred tax assets moved higher by roughly $8 million this quarter, primarily the result of $5.3 million in net operating losses inherited as part of the Sendia acquisition. Deferred revenue ended the quarter at $182 million, an increase of nearly 74% from a year ago and up 8% from a remarkable Q4. Given our seasonally high year-end bookings and renewal activity in Q4, this sequential performance was similar to what we saw last year. Before I offer you our outlook, let me spend a moment on our Sendia acquisition. As we indicated to you in April, the wireless capability that we acquired is strategically very important to our business. In addition to our standard GAAP reporting, we also intend to provide non-GAAP results that exclude the expenses associated with the amortization of certain Sendia purchase assets. As we have noted, with very little revenue and more than 30 people in that business, the operating performance of our wireless group will be negative for the year. In that context, we expect our non-GAAP operating results to reflect roughly $0.01 of EPS dilution per quarter, or roughly $0.03 for the remainder of the year. With that said, let me provide you with our updated outlook for Q2 and the full year. First, Q2 -- given our strong subscriber and revenue performance in the first quarter, we now expect revenue for our second fiscal quarter to be in the range of $112 million to $114 million. When you include the $0.01 operating impact of our Sendia acquisition, but you exclude the amortization of purchased intangibles and the impact of stock-based compensation, we now expect Q2 non-GAAP EPS to be in the range of $0.03 to $0.04. Also, based on our strong Q1 performance and increasing demand for our products and services, we are raising our full fiscal year '07 revenue outlook to $478 million to $483 million. Non-GAAP EPS, including the $0.03 of operating impact from Sendia, and excluding the amortization again of purchased intangibles and the impact of stock-based compensation, is now expected to be in the range of $0.17 to $0.19. This estimate is in line with our prior guidance when you net out the impact of Sendia. To conclude, Q1, as Marc said, was an excellent quarter. Our financial performance reflected our continued focus on increasing customer value and our AppExchange platform is really starting to gain momentum. Customers are using our CRM applications and platform like never before to manage more and more of their daily business activities. That is why we are so bullish about our future, and why we are raising our outlook for the coming year. With that, Operator, if you will open the lines, we will take questions.

(Operator Instructions) Your first question is from Thomas Ernst, Deutsche Bank. Greg Dunham - Deutsche Bank: Actually, this is Greg Dunham on behalf of Tom. First question, the pricing looks great and the enterprise deals look really good. There's still some investor concerns regarding net sub adds and the year-over-year growth there. Could you just address those? How should we think about that going forward? Is this a pricing growth engine or is this a net new subscriber growth engine?

Well, we had 65% growth year over year, which has been fairly fantastic. Keep in mind, this is Q1 coming off of a very strong Q4. It is a combination of some ASP, $2 a unit on new subs is somewhat minimal, but we also saw very strong sub growth. We're very excited about the performance of Unlimited Edition that came out just recently in this quarter. So, we didn't get a full quarter of that. The AppExchange platform is catching on. So, we're very bullish about the go forward here. We have a lot of pilots; Marc described a lot of major accounts that are in pilot mode for our product. We had new or existing customers, like Cisco, continue to up and add subscribers. So, I think this is just a normal course of business. We think the growth rates are going to continue. We have great new products coming out the rest of the year. Marc, do you have anything you want to add? Marc Benioff: Well, this is obviously one of our absolute best quarters ever. Of course, we had an outstanding fourth quarter where we added 48,000 subs. Now in this quarter, we just added 45,000 subs. If you look at a year ago, in the first quarter, we added 40,000 subs. But, as we disclosed last year, we had a substantial overhang from the fourth quarter. I believe that overhang was almost 20,000 subs coming into the first quarter from the fourth quarter of the previous year. This year, our overhang from the fourth quarter was much smaller based on changes that we made to how we compensate our salespeople. That really is a substantial increase for us in the number of net subs added in this first quarter. We are very excited about 45,000 subscribers. We are very excited about Cisco becoming our largest subscriber at 7,500 subs. We are equally as excited about 2,200 customers, the most we've ever added and the potential for now moving them up this kind of sub ladder that we have.

Our next question comes from Laura Lederman, William Blair. Laura Lederman - William Blair: Just a few quick questions. Can you talk about leveraging on the P&L long term? In other words, sales and marketing is still such a high percentage of revenue, how do you see that leveraging over time and what changes would you potentially make in your distribution model to help improve the sales and marketing revenue? Separately, I hate to bring attention to someone else's research, but there was someone commenting on the problems at ADP. Can you just talk a little bit about what's happening at ADP? Sorry to throw so many out at you, but just update us on the outages and the plans that you have to keep things up going forward and whatever you are willing to share on that subject. Thanks a lot. Sorry to ask so many questions.

Laura, let me start with the leverage. You have to keep in mind, we're still gaining presence in markets and countries here. You saw our sales and marketing costs as a percent of revenues continue to drop year over year. I just think people have to understand; a good example, we have no offices between Tokyo and Sydney but we have customers in all the countries out there. So, you're going to see us continue to build that out. This is nowhere close to touching all our customers and addressing all the markets that we are in. So, we are going to continue to do that. We have said we're going to invest in our growth, and I think we've done that. We had strong subscriber growth year over year. We're hiring more and more salespeople throughout the world that we can find. So, you'll get the leverages. We've often talked about, we believe our margins will be higher as time goes on. You also have to consider when you look at the numbers between last year and this year, this 123R cost is fairly significant. So, I would just caution everybody to be careful when they do expense compares between last year and this year. There's a huge amount of leverage going on, but we also want to make sure we attack all the markets and put our people in front of our customers and potential customers throughout the world. I will let Marc talk about the other comments. Marc Benioff: Yes, and just to add to Steve's comments. We are in a market share war. We have been investing very, very heavily to achieve market share. That is our number one goal. I'm sure you know, Laura, as one of the leading analysts in this industry, I think that maybe we're perhaps one of the only ones who publish these subscriber numbers and customer numbers on a consistent and regular basis to allow you to have full transparency to our business. That is to demonstrate that we are increasingly developing a commanding position in this market. That commanding position requires us to invest and in salespeople specifically. To be able to go out and to build a worldwide sales force is very expensive. For a traditional enterprise software company, it is very expensive. But it's even more expensive for a software company that's based on a deferred model like ours, where the revenue from that salesperson generally does not show up from perhaps 18 months. In the original enterprise software model you probably would hire a salesperson and see them coming to productivity after nine months. Then right away, you start to get the benefits of those license fees. In our model, yes, they are productive after nine months. But, of course, that revenue doesn't necessarily start until after the subscribers kick in and the implementations are done and things are full swing. So, when you are investing in an on-demand model and you are investing in a sales force for an on-demand model, you are going to see more of a tail on that investment. Until we dramatically slow down our growth, which is not something we're going to do, you will continue to see this heavy investment in sales and distribution because we are fighting armies much larger than ours. With SAP and Oracle, we have to get to a large sales organization. Today, we are not yet at that level. You also asked about ADP, and I saw the same research that you saw and I was shocked. I was appalled when I saw it. Because, our relationship with ADP is outstanding. I immediately called our champion at ADP, who was as shocked and as appalled as I was because our ADP relationship is really spectacular. They have a very high login. We manage tens of millions of pieces of information for them. I think it's 30-50 million contacts and accounts; huge numbers. They are deeply vested into our architecture and our schemas. We deliver tremendous performance and flexibility to them. We have rolled out a substantial number of their divisions. That piece of research that you saw that said we had lost one of those divisions, we had never implemented that division. I just was completely taken aback when I saw that, and I really wonder what the intention was behind that. Finally, you briefly asked about our reliability. As you know, in the fourth quarter, we moved to a huge new data center investment to $50 million data centers, basically a $50 million data center investment. When we went to that new architecture, we unexpectedly started to see our reliability fall as we hit a couple of outages. We strongly believe that those outages are not only behind us, as evidenced by our reliability this quarter which approximated 99.9%. Of course, you can look for yourself at trust.salesforce.com to see that reliability in real-time. But, also, we have I would say created and discovered some new technology that we are now in the process of deploying that we believe will take our reliability even higher. You may know that our reliability on our European and Asian servers for this quarter ran at approximately 100%. That technology that we deployed there, we now plan to move to our North American servers as well. This is software that basically we've built and is in the process of being deployed. Customers have been notified, and we believe that we are on the verge of being able to hit much higher levels of reliability for all of our systems worldwide; not just the 100%, for example, that we hit in Europe and Asia this quarter. But we want to bring that power to North America as well. We know how to do it, and we're executing that plan. So, I hope that answers your question. Laura Lederman - William Blair: Yes, thank you.

Our next question comes from Jason Maynard, Credit Suisse. Jason Maynard - Credit Suisse: Good afternoon, guys. Marc, I wanted to follow up on a comment that you made about the overhang from Q4 last year into Q1. You sort of normalized that in apples to apples, the net new sub growth. Are you sort of implying that the net new subscriber growth was significantly higher than the 40,000 that we see reported? Marc Benioff: Jason, I'm loath to give you the numbers because they are not in front of me. But I will give you very broad approximations, if that's all right with you. Jason Maynard - Credit Suisse: That would be great. Marc Benioff: In the first quarter of last year, you remember that we executed about 40,000 subscribers. On the call, we cautioned you that there was a substantial overhang from the previous fourth quarter. By I would say, February 15th or two weeks into our quarter; or maybe by the end of February in that first quarter of last year, we had already acquired 20,000 subscribers. And then, we added another 20,000 subscribers in the next 60 days. Again, I'm giving you approximate information because I don't have the specifics, but that's pretty darn close. The majority of the subscribers for the fourth quarter this year were actually implemented in the fourth quarter due to a change that we made in our own sales force compensation. For example, in the first two weeks of this quarter, perhaps we only saw -- and I guess I'm giving you approximate numbers -- about 5,000 subscribers. Perhaps there was less than 10,000 subscribers completed within the first month of the quarter. We normally don't give you this type of detail around subscribers because it's not that interesting to us, honestly. What the power of our model is -- the predictability of the revenue, the predictability of the expense line, the total subscriber number, the usage number -- this is where the power is in our model. Exactly when a certain subscriber comes on or whatever has never really been part of what we want to be about at salesforce.com. But, this was an outstanding quarter with 45,000 net subscriber additions, and we're very excited about our results. Of course, the net customer number is at a record level as well. Jason Maynard - Credit Suisse: Just as a follow-up, I share your enthusiasm for the predictability. The question would be, has there been any change in sales productivity or has there been any change in churn that would influence that subscriber number? Marc Benioff: Specifically, let me take them in that reverse order. In regards to churn, no, we have had no consequential change in churn. I know it's still less than 1%. I think that's something like, the approximate number is 0.7%. But, we don't give guidance on churn. As you know, it's not a number that we have here at our fingertips. We keep an eye on it. It's very important. You know, you do a very good job of managing and monitoring all of our customers and talking to them and so forth and so on. I would be surprised if you knew of any customer we have ever lost of any consequence in our history in the last seven years, who are the two or three customers of any consequence that we lost? It's unlikely that you can come up with any. If you think about our competitors, a lot of our major customers like ADP, like Cisco, like Merrill, and others came from our competitors as you well know. We don't have that because we are so passionately focused on customer success and adoption and the usage of our products, and that is where our focus is and that is where our intensity and energy is around. You also asked about sales force productivity. Sales force productivity tends to be variable based on two things: one, the timing of our fiscal year and the sales force productivity tends to be the highest during the fourth quarter. Of course like a lot of enterprise software companies, it's the nature of compensation plans. Two, as of course we hire more and more salespeople, overall productivity falls until those salespeople get productive and up to speed. Then, overall sales productivity goes to a high level. But, we have not seen any substantial change in our overall productivity of a production sales person if you will; that is a salesperson who has been on board for six to nine months, who is trained, who has a territory. We really have a pretty good handle on what we expect out of those salespeople on a regular basis. We manage them very tightly. We have a very senior sales management organization. It's a global organization. It's trifurcated. It's not just for small and medium businesses or even for large enterprises; it also has targeted accounts orientation as well. In all of those areas, we have very strong productivity and we're very happy with our distribution organization and the productivity that we're getting out of them. Just look at the numbers, for example, where we are starting to approach 0.5 million subscribers. This is a powerful time for our Company.

Our next question comes from Rick Sherlund, Goldman Sachs. Chris Sailer - Goldman Sachs: It's Chris Sailer for Rick. Just following up on the last question with regard to overhang of subs last year, what should that then imply for the sequential growth that we see in July? I guess it was only up 1,000 last year. So, I would assume given that there's less overhang, then we would expect to see a more significant sequential ramp this year? Marc Benioff: Chris, you should go back and look at not just the first quarter of last year which is what you're asking about. Look at the quarter before that, and you will see a substantial delta that achieved between that fourth quarter and first quarter. Do you see that number, that change? Chris Sailer - Goldman Sachs: Yes. Marc Benioff: Well, that is because a significant overhang came from the fourth quarter to the first quarter to the point where we really made a strategic decision that we, at that time, were not compensating our salespeople properly to work to get subscribers into the quarter where their deals happened. We made that change last year, and really that change is still coming into place. We do not, as a Company, focus a huge amount on when subscribers get activated. But, what we do focus on is the success of those customers, the adoption and making sure that those customers are vested into our architecture and into our schema. Chris Sailer - Goldman Sachs: Right, I guess what I'm just trying to get is what would a normal seasonality look like this year say versus last year, given the changes in the comp plan as well as I guess the addition of more salespeople in general? Marc Benioff: Oh, we don't give subscriber guidance. The reason why is, we don't really know. Of course, we are in this great position in our market today because our primary competitor that we had one year ago, Siebel Systems, has disappeared from the market. I went down to their buildings recently only because I noticed that they were empty and their doors are locked. A year ago, those buildings were filled with competitors and people trying to put us out of business. They are vaporized. It's amazing; there's nobody left in those buildings. The sales forces and the product organizations and the development organizations are gone, and this has been just a watershed event for us. It's a big change that's happened in the last year. Because there's so many changes happening in our industry all along, it's just impossible to know. For example, the big thing that's happening now is SAP is out there promoting on-demand when they don't have any technology. So, what we've done is we are getting invited into all these great SAP customers, like Citrix where we just closed; or DuPont, or so many customers who want to look at on-demand for the first time. We have the technology; we have the customer success. We have the references at scale and by industry, and we are just trying to execute. So, it's very hard for us; and we would tell you if you want to know. If you want to know what the revenue is going to be next quarter or for the year, we're pretty good about that. We've been very good about our ability to forecast that because of the nature of our model. We are not as good at the variable number. But, by this quarter, you can see we had some very strong results.

Our next question comes from Brent Hill, Citigroup. Brent Hill - Citigroup: Marc, if you could just talk a little bit about the timing of new subscribers associated with the AppExchange? I think you mentioned earlier that there were 8,600 applications now downloaded. The subscriber numbers don't really match up to that improvement year-over-year because AppExchange just went live. So how should we think about the follow through of subscribers onto the Exchange? Marc Benioff: Well, we are very optimistic about AppExchange as I'm sure you know. We've seen tremendous traction in the ISV community. We've seen a lot of innovation, a lot of creativity and a lot of power in the AppExchange. In the US AppExchange as well as in the Japanese AppExchange. Well, I want to tell you that not only have we seen that power with the ISV community but, of course with customers. They are downloading AppExchange applications. In some cases, they are deploying those applications. In other cases, they are still testing those applications, they are customizing those applications, and they have not yet deployed those applications. It's impossible for us to know, because AppExchange is still only a few months old, exactly what the subscriber ramification will be for the AppExchange. But of course, we're very optimistic about the AppExchange. But what I can tell you based on the experience of this quarter is that our new Unlimited Edition, which is our new higher-priced product, is a product that a lot of our customers are moving to because they want to bring all these AppExchange applications in. A lot of our customers are on Professional and Enterprise Edition, which are constrained with the number of tabs or the number of fields that they are able to support. They want this new Unlimited Edition, which has all of the power of unlimited tabs and the unlimited fields and data storage as well as wireless capability and Sandbox and other capabilities. I would reference you to our website. If you go to our product tab, then on the right-hand side, there is an edition comparison chart. You will see why our customers are moving to Unlimited Edition. We're very optimistic about that. We're very optimistic about AppExchange applications being deployed, moving customers to Unlimited Edition. We believe that customers will also continue to deploy new applications and that that will yield more subscriber seats in existing customers, which is one of our strategic goals for the Company.

Our next question comes from Kash Rangan, Merrill Lynch. Kash Rangan - Merrill Lynch: Your ASPs are moving up, the churn rate is going down, your sub is the third variable that really goes into your guidance. So, am I wrong to think that the next quarter guidance which calls for an increase in revenues is predicated on ASPs going higher because of the Sandbox in the Unlimited Version? Churn rates getting smaller and possibly a sequential growth in the number of new subs added? I've got a follow-up question.

No, I think what you're going to see is the relationships hold pretty constant here. They don't have the dramatic impact which we typically see. UE has certainly got a lot of interest. Sandbox and the wireless component are amazing features that customers desire. The methods that we have are pretty standard. So, I would look at that from a model-to-model standpoint. Kash Rangan - Merrill Lynch: So, I guess if there is an increase in ASPs, would you still be able to produce your revenue guidance, let's say if subs were flat? Or do you think you need a sequential growth? You don't have to tell us what the exact sub number expectation is, since you've already said you're not going to guide based on that. But, if ASPs go up by a couple of dollars and if churn rates are the same, do you think you need to do a flat number of subs or higher number of subs in order to hit your guidance?

You know, I'm not going to go into those details because there's a lot of moving pieces here. We have product mix, we have timing of when subscribers come on, we have small business and large business. So, we feel really good about our guidance on the revenues. We feel great about the earnings numbers. I think you just have to work your models to consider your view of what those variables are. Marc Benioff: One of the things that I would really bring your attention to is as we said now on maybe the last eight calls, we'd love to be able to tell you when are the subscribers going to exactly happen? When will they exactly get implemented? when will those users come online? But, we're just not very good at that. The reason why is because we always defer to our customers. We let them decide what is right for them, not what is right for us; not what is right for our financial analysts, reports or anything else. We let our customers decide what is appropriate for them and how can we best serve them. Different customers require different implementation times, different subscriber activation times and so forth. But what we've seen and what you have seen as analysts is that these customers are expanding over time. Just look at Cisco Systems. How many times have we had to take a phone call from you or seen a research report saying that we have lost Cisco; what happened? You know, now Cisco is of course are largest customer, and they have expanded over their history with us -- as you know. But, I want you to just pay attention to these customers are expanding. They are growing. We have our largest customer at 7,500 subscribers today. We fully expect that we will be able to tell you within the next quarter or two that we have a 10,000 subscriber customer. We see the whole base expanding. We see AppExchange as a catalyst for expansion. Our job is to move more customers in at the bottom of the pyramid and move them up over time. That is the power of the model, and that is what we want to have happened. There's a lot of change happening in our market -- competitors coming, leaving, new competitors coming in, changes. Our passion has to be around execution and the day-in and day-out process of making the customer successful. We know if we make that customer successful, we will keep that customer over time and they will expand. That is what is happening in our base today.

Our next question comes from Brendan Barnicle, Pacific Crest Securities. Matthew Dawson - Pacific Crest Securities: This is Matthew Dawson for Brendan. Just a quick question on the sub adds -- do you plan to continue to give the sub add number? If you were to stop giving that number each quarter, what would change to make you stop giving that number? Marc Benioff: I want to tell you how much I appreciate that question. You know, I put this in the same bucket as the ADP questions. Why would we stop giving the subscriber number? Our whole mantra in this company is transparency. We give you transparency more than any other enterprise software company ever has given you transparency, into customers, into references. You know, we have this unbelievable event happening next Wednesday. We are inviting you all to that, meeting the customers, having access to them. Our whole mantra, the transparency mantra, whether it is server reliability, you know, the revenue model, the revenue recognition model. When we designed this company, we said from the beginning, and you can check, all of our original visions way before we were ever public, we want to be transparent. Everything, right down to the 10B5-1 plans, we want to give you transparency and predictability and visibility into what is happening with our company, and we have tried to do that. Why would we take away the subscriber numbers, subscriber reporting? Why would we take that away? It is against our whole concept of a company. You know, who came up with that? Who came up with this ADP thing? Who came up with “you know, we are losing Cisco”? I do not know who those people are -- I would like to find those people, but I do not know who they are -- but it is like, have you hung out with us at all? Come and meet us and talk to us and come to our conferences. By the way, we are a broken record. We play the same tape conference after conference, conference call after conference call. We try to make very little change to the vision of the company. It has been the same from the very first day that we started, and our mantra, our values, the focus on customer success and momentum, and the focus on execution and distribution, all of this -- this is what we are about as a company. We are trying to do the very best we can. Why would we make a change like that? What, is that in your interest? Is that in our interests? It is not. So where is that coming from? It is not coming from us. It is not coming from anyone in our management team. Like I said, I put that in the same bucket as ADP, these customer rumors, and all -- I mean, I have read some other stuff that is just unreal. I would caution you in the future to how you respond to some of that, because it is amazing to me, honestly. Call us if you want to ask us that question, or come to one of our public Q&A sessions that we have on a continuous basis at events throughout the quarter.

Our next question comes from Peter Goldmacher with Cowen. Peter Goldmacher - Cowen: Marc, I will give you a second to catch your breath again after that question. Can you talk a little bit about what is going on in the professional services organization? You guys have had really, really nice professional services growth. How is your growth jiving with your partners and the guys you are going to market with? Are you getting any friction in that channel? How are you guys going to market to make sure that you are keeping your SI partners motivated and not competing for the same business? Marc Benioff: Well, we have been very fortunate to have developed a channel strategy that does not conflict with our distribution strategy. If you look at a company that we work with very closely, like Accenture. We work with Accenture at Aon, we work with them at Cisco, we work with them at Chevron, we work with them at Kaiser -- it is a very symbiotic relationship, because unlike other enterprise software companies, we do not have large services practices here. So very much symbiotic to the way we are as a company. We need these SI’s to be successful with us. I think that is why we are getting invited to so many deals with them, because it is very complementary and there is no risk of us interfering with their revenue stream, which is not true with other providers, for example, like IBM or even Oracle. So we feel very good about that today. Peter Goldmacher - Cowen: It is not clear to me -- how do you go to market with these SI partners? How do you parse up the business? What piece do you guys own and what do they own? How do they feel comfortable? What rules are in place, or what are the rules of engagement?

What we are looking at doing, and thank you for this question, because it is nice not to have to give subscriber guidance. What I see is that these systems integrators, as I explained, are very symbiotic. In many cases, they have the relationship with the customer. In many cases, they had already come in with the SAP or Oracle recommendation, and it has imploded or failed. They can come to us, and in some cases we come to them, and they say “oh, we have this opportunity. We want you to work with us on this opportunity.” I guess Chevron is a great example, where Bill Green at Accenture can come to me and say “hey, I have this deal with Chevron, but on-demand is really the right answer for this customer. Will you come and help us with that?” Then we drive out to Chevron and meet with them and talk to them, and then we work to implement them with Accenture, and Accenture does the customization, Accenture does the integration, Accenture does the change management. Accenture is doing maybe the comp plans, sales reorganization, strategy, all that. We are providing the information management service. That is our component. Accenture does not provide information management service over the net. That is our value to them. Then we help to implement Accenture's strategy pallium, their concept through our application, because it is so customizable, so flexible, the ability to add all these things from the AppExchange, we can deploy it very, very rapidly. We have had great success at many companies. The most recent one I can tell you about is Kaiser. I was just with the head of their sales organization. It has been a great success for us so far, and we see continued expansion.

Our next question comes from Philip Rueppel with Wachovia Securities. Philip Rueppel - Wachovia Securities: I think you made it pretty clear that you have not lost many, or any, major customers. But over the past few months, have you sensed any major or smaller customers slowing some of their planned rollouts while you demonstrated that your operational reliability improved? Now that you have some of that technology in place and can point to that, do you sense any acceleration in some of those plans? Then, second of all, on AppExchange, you mentioned both the increase in ASP’s as well as increase in seats as drivers to Salesforce revenue. Can you point to any examples, and I know it is early, but of customers that have bought new seats just for an AppExchange application, or again, is that just too early to point to? Marc Benioff: Okay, those are two really good questions. First of all, let me take the first question. If you remember on our call at the end of the fourth quarter, the question that was on the call was: “You just had a couple of these bumps in the road, and you have been around for seven years, you guys have been running at three and four nines, and you have these service interruptions. What is going on? Are you going to lose customers because of that?” We said to you at that time we do not see us losing customers because of it. We do not believe that it was material to our customers. We do not believe that it was affecting our position in the market, or our ability to win deals. Now we are reporting our first quarter and you can see a record customer addition. You can see a strong subscriber increase. You can see existing customers expanding. So hopefully, you will see that what we said in the fourth quarter has come true in the first quarter. We believe that our solution is a lot more reliable than the stuff they are running even inside their own companies. I do not know what customers you are talking to, but I go to customers and they say “you had a brief center service interruption, we lost our whole data center for two days. We had this problem, we have that problem.” I mean, we are experts at what we do, and we work hard every day to give our customers the highest level of performance and reliability and scale and trust in us that is possible. We believe that customers are continuing their normal course of business with us. It was an unfortunate time during the fourth quarter, but we believe we are through it and we do not see adverse market reaction to us. I believe the analysts on this call, who have done multiple surveys to our customer base and to our prospect base, understand that. Of course, our competitors might have something else to say, but our competitors are not showing their wins in this market. What new wins do they have? What customers do these competitors have? Why can't they bring forth a subscriber number? Let’s see those competitors come forth with something of any consequence. It is not happening because we do have a commanding position right now in the market because of the quality of our technology and the quality of our customer success. The next piece you asked about was expansion of seats within customers. We have seen a number of customers expand their implementations with us. That is part of our business. We talked about that on our last call. We gave several customer examples, and if you are interested in that, I am sure our IR department can point you to customers to talk to who are expanding their business, and you can give them a call. I would suggest you come to AppForce and ask our customers yourself, and see if they are using AppExchange and if they plan to expand their deployments. I would recommend you attend the conference on Wednesday. I will be speaking at 9 a.m. I will also be introducing an exciting new product and exciting new strategic relationship. I will be joined by the head of enterprise at Google. Also, the CEO of RIM will be with me, the CEO of Informatica will be with me, and others. It is going to be a very exciting day next Wednesday in San Francisco at the Sheraton Palace.

Our next question comes from Michael Huang with Thinkequity. Michael Huang - Thinkequity: Just a quick clarification. I was wondering, I think you had mentioned that 5,000 AppExchange Mobile subs were added in just the first couple of weeks, and I just wanted to clarify -- were these subs that were incremental to the user already signed up by Sendia prior to the acquisition? The follow-up question is, were these primarily from customers who moved to the Unlimited Edition, or did you see a number of customers who just added Mobile seats to their existing editions? Marc Benioff: I am asking David what the answer is, because I do not really know. Why don’t you just tell him?

The 5,000 number is the total amount that have been provisioned, so we did inherit some customers who already provisioned with Sendia, and we are seeing our UE customers continue to provision as well. You heard Marc talk about 4,000 subscribers already purchasing UE, and those customers are beginning to provision wireless into their environment. The total number we have provided is the combination of what was inherited via the Sendia acquisition and UE customers that are continuing to provision. Marc Benioff: Let me also add to that -- we see wireless as a major reason why customers are moving to Unlimited Edition. When they look at the additional fee for the Wireless Edition, when they look for the additional fee for AppExchange applications that they are adding, and when they look at the additional fee for Sandbox or for Premium Support, many of them are just deciding to move to Unlimited Edition. That is one of our core strategies for our company, from a pricing standpoint.

Our next question comes from Mark Murphy with First Albany. Mark Murphy - First Albany: Marc, with AppExchange, understanding that it is still very early stages here, how do you feel about the level of adoption and the number of third-party applications being written, relative to your expectations last fall? As a follow-up, what is your intended mix of AppExchange applications between third-party created and Salesforce created, if we look at that a few years down the road? Marc Benioff: Thank you for that question. The first question I will answer is the last one. I think it is approximately 23% of the applications on AppExchange were written by us and the other 75% are written by third parties. We currently are seeing about 60 AppExchange applications a month being submitted to us for approval and addition onto the AppExchange. We do not have the throughput to be able to put all those AppExchange applications up there, because we do a pretty thorough quality analysis. We make a lot of recommendations, we send a lot back. Our goal is to get to 1,000 AppExchange applications -- high-quality AppExchange applications -- as fast as possible, and we are moving to that goal very rapidly. If you had asked me last September that by May, we would have already more than 200 AppExchange applications, including some very popular ones, like these project management applications, which are very hot, or Skype, which is very hot, I would not have known. On this type of thing, no one else has anything like AppExchange. Nobody else has a platform like this. No one else has the kind of proven scale, proven reliability -- when you couple it all together, it is hard to exactly forecast, but we are very excited. I have used some of these applications myself. We run a project management office for Merrill Lynch and I use that application. It is a project management application made by an independent third-party ISV from the AppExchange called DreamFactory Software. I love it. It helps me integrate the data I have, and gives me new functionality that I would not have been able to have otherwise. Again, we are very focused on this partner success. I would talk to some of these partners, like DreamFactory, or like VerticalResponse, or like Skype. You could call e-bay. Just look at the top 5 or 10 apps that are being downloaded -- we post that information -- and ask them the kind of lead rates they are getting and the customers they are talking to, I think you would be very surprised. I could not be more delighted. Again, we will see it in person next week. We will see what the level of interest is when we have this first AppExchange conference.

Our next question comes from Abhey Lamba with UBS. Abhey Lamba - UBS: Congratulations on a great quarter, Mark and Steve. Just a couple of quick questions. What were the cash taxes in the quarter? What do you expect them to be for the full year? Do you have any color on that? As well, I have a question on AppExchange. You mentioned that a lot of customers are moving on to Ultimate Edition, but some of the customers who are not using any of the CRM functionality, are you getting any demand from ISV’s for more for platform pricing, or somewhat of an option with customers can use those applications without using any of the CRM functionality? Marc Benioff: That last question about AppExchange, I am going to save until Wednesday. Steve, do you want to answer the first question?

We had mentioned last quarter and we are still seeing about 10% on cash taxes. Abhey Lamba - UBS: Thank you. Marc Benioff: Thanks very much. It has been nice talking to everyone today, and we look forward to seeing you Wednesday at the AppForce AppExchange User and Developer Conference. Have a great day.

Thank you for joining today's conference call. You may now disconnect.