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

Tom Ernst - Deutsche Bank Securities Brent Thill - Citigroup Jason Maynard - Credit Suisse First Boston Brendan Barnicle - Pacific Crest Securities Peter Goldmacher - Cowen & Co. Chris Sailer - Goldman Sachs Kash Rangan - Merrill Lynch Mark Verbeck - Cantor Fitzgerald Dan Cummins - Bank Of America Bradley G. Whitt - RBC Capital Markets Yun Kim - Pacific Growth Equities

Good afternoon. My name is Melissa and I will be your conference operator today. At this time, I would like to welcome everyone to the fourth quarter fiscal year financial results conference call. (Operator Instructions) I will now turn the call over to David Havlek, Vice President of Investor Relations. Mr. Havlek, you may begin your conference.

Thanks, Melissa, and welcome, everyone, to Salesforce.com's fourth quarter fiscal year 2007 financial results conference call. Joining me as always today are Chairman and CEO, Marc Benioff; and Chief Financial Officer, Steve Cakebread. Before we begin, I would like to emphasize that all of our financial commentary today will be in GAAP terms. Please consider this as you evaluate our results, particularly against First Call estimates which exclude certain recurring items, such as stock-based compensation and purchased intangibles, and when making year-on-year comparisons to prior year results, which may not include these expense items. A full disclosure of our Q4 financial performance can be found in our fourth quarter results press release issued earlier today and also in our Form 8-K filed with the SEC. Additional financial information beyond what is provided in the press release may be found on our website. Today’s call is being webcast and a replay will be available shortly following the conclusion of the call through March 8th. To access the press release, the financial detail, or the webcast replay, please consult our investor relations website at www.salesforce.com/investor. Finally, let me remind you that the primary purpose of today’s call is to provide you with information regarding our fourth 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 milestones, anticipated growth, goals and 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 the Apex platform or language, the AppExchange directory or other products specifically, market opportunities, expected implementation of our services by certain customers, data center, 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 and 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 10-Q for the quarterly period ended October 31, 2006. The Q is available on our investor relations 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 purchased our services should make these decisions based on features that are currently available. With that said, let me turn the call over to Marc.

Thanks, David. Our fiscal 2007 ended with a bang and it is a sound that is being heard around the world as a starting gun for a new on-demand industry focused on customer success, as well as a new era for Salesforce.com and our breakthrough on-demand platform strategy. At the fiscal year finish line, we are turning in some remarkable numbers. We added more than 0.25 million subscribers in fiscal 2007, approximately 1,000 every business day. It took us five years to get to our first 250,000 subscribers and yet we did that many in this year along. That is breathtaking momentum. That momentum has kept pace across all customer segments, particularly in large deployments. We now have 47 customers with more than 1,000 subscribers. That is up 81% from a year ago and there are 150 customers with more than 500 subscribers, up 88% from last year. Our hardware and software infrastructure set new benchmarks for security, reliability, availability and transparency. We delivered approximately 4.3 billion transactions in the quarter, up 116% from last year, and they were delivered faster than ever, approximately a quarter of a second, an improvement of 32%. That kind of scalability is every CIO’s dream, and we are delivering that dream every day and it is there for the world to see every day on http://trust.salesforce.com. Customers are more engaged than ever. The number of users per day is up 67% and customers are integrating their systems with ours more deeply than ever before. Calls to our application programming interface, or API, now account for 55% of our total transactions. Just 13 months ago, the AppExchange went live and customers were installing their very first apps on our platform with just a click. Today, the AppExchange is a vibrant marketplace with 520 apps from 250 ISVs. This is an increase from approximately 150 applications a year ago. Now, more than 8,000 customers have installed 20,000 apps, and they have taken more than 200,000 test drives. For our partners and customers, the AppExchange has gone from a standing start to a standing ovation. Our technology has been doing anything but standing still. Our innovation accelerated dramatically in 2007 with announcements of new products like Sandbox, Unlimited Edition, Apex Mobile, Summer ‘06, Salesforce PRM, Salesforce for Google Adwords, App Store, Winter ‘07, and perhaps the most significant innovation for us and the industry, our new Apex programming language, which is now in beta. For the traditional software industry, which ekes out a new release every six years or so, this would be a remarkable list of accomplishments for a decade. But for us it is business as usual in an exciting new industry that we are defining and leading. When we first started talking about our vision many years ago, there was plenty of skepticism. But now, all the major research firms are seeing the same thing; on-demand is the future and customers are eager for it. For example, Gardner predicts that 25% of all new business software will be delivered as a service by 2011, and a recent McKinsey survey of enterprise company CIOs showed 61% were planning to implement software as a service. Experimentation is over -- the age of widespread adoption has begun in the enterprise, and there is no other company that has the track record of success and the world’s first on-demand operating system to take advantage of it. Let’s look at some of the strong numbers in the fourth quarter. Fourth quarter revenue of $144.2 million was up 58% from the year-ago quarter. Our annual revenue run-rate is fast approaching $600 million, another milestone as we push toward our goal and dream of $1 billion in annual revenue. For the full fiscal year, revenue of $497.1 million rose by more than 60% from fiscal ’06, making Salesforce.com the fastest growing software company of our size. GAAP EPS was break-even for the quarter, at the high-end of the guidance we gave you last quarter. For the full year, our break-even EPS performance was excellent when you consider it included stock-based compensation and significant investments in our sales capacity infrastructure and technology. Cash from operations totaled more than $38 million for the quarter and we ended the year with approximately $413 million of cash and marketable securities on the balance sheet. We added approximately 90,000 subscribers in the fourth quarter, a record. We also added a record 2,700 new customers in the period and our business showed consistent strength in small, medium, and large businesses. Just a few weeks after we told you about Cisco Systems expanding to 15,000 subscribers, we announced that Dell is also signing on for 15,000 seats. In addition to Dell, we added Plantronics, MSE Software, Saba Software, ROCKETin, and Arrow Electronics. And some of our existing high technology customers got even bigger this quarter, with subscriber additions at Symantec, Brocade, Business Objects, Electronic Arts, and Citrix Systems. We also continue to enjoy great success in the financial services market with customers all over the world. We added a large group of new financial services customers, including Barclays Wealth, [Olionz] Australia, Hartford Life, One American, Sumitomo and RBC. Major add-ons included ABN Amro, which added more than 1,000 users to become one of our top 50 largest customers. We also saw subscriber expansion at large financial institutions that include Deutsche, Société Générale, Citizens, TDAmeritrade, Thomson Financial, [Nico] Asset Management, E-Trade, and Wells Fargo. But our success is not limited to a few industry verticals. We are seeing broad adoption of our service by customers from all industries. Ashland Distribution added 900 customers to bring their total deployment to roughly 2,700 and Baker Hughes grew to roughly 1,500 during the quarter. Our service and support business is also gaining momentum. During the fourth quarter, Fortune 100 giants Proctor & Gamble and Wal-mart both selected Salesforce.com to help them manage their call center customer interactions. In all, we closed nearly 500 service and support deals in the fourth quarter, 150 of which were at new customers. As I mentioned earlier, the fourth quarter ended with a bang -- a big one. Next Tuesday in New York City, we will announce our largest deal ever; a major customer expanding to 25,000 subscribers, 19,000 which are net new subscribers in the fourth quarter. We will give you details behind what I think is one of the most decisive and influential bets on software service ever. More important, we will explain the winning strategy of technological excellence, open standards, and best-in-class partners that make it a model for future success in a demanding industry. Join our audience of top customers, media and analysts on the webcast at Salesforce.com/investor. Or if you are in New York City, please speak to our investor relations department for an invitation. That major deal was the capstone to a remarkable fourth quarter and we look forward to discussing it in detail with you next Tuesday. I would like to take a moment to talk about the incredible platform and services that we have put together at Salesforce.com and how they will redefine our company and I believe shape the software service industry. We will be talking a lot more about this in the months to come and even next Tuesday in New York, but here is the big picture of what we call Salesforce.com 2.0 and Our Circle of Success. Ask any customer or industry analyst and you will hear that our on-demand killer apps have redefined what an enterprise application is and what end users expect from enterprise applications overall. Our enthusiastic community is motivated to use the idea exchange at ideas.salesforce.com to communicate where the opportunities still are in on-demand and point in a global audience of developers and ISVs to exactly what to build on-demand. Our new Apex technology platform means that these developers can now build almost any application on-demand easily and deploy those applications immediately on the $100 million platform that we have built over the last eight years. Finally, our AppExchange marketplace will provide a directory to our worldwide customers of thousands of on-demand apps and new app store checkout services allow those applications to be purchased and deployed on-demand with a speed and efficiency that is unprecedented in enterprise software. Simply put, we believe there is no better way to conceive, develop, market, sell, try, buy and deploy enterprise applications. It is a circle of success. Customers can break through their huge application backlogs with a platform that they not just trust but love. A worldwide talent pool can meet this need. All that stands between a developer and success now is a brainstorm and a browser. That is friction-free development on-demand for a flat world. As you know, we like to have a little fun here at the expense of the established giants, like Microsoft and SAP and Oracle. But in a new century of opportunity on-demand, why would any developer in their right mind choose platforms that defined the last one? Why build your business on an operating system that has stopped innovating? Why would a customer choose rigidity and complexity over flexibility and simplicity? The answer is that more customers, developers and ISVs are choosing software as a service and they are asking Salesforce to show them the way with our platform. When we first started Salesforce.com, we had to do a lot of heavy lifting -- basically, complex software programming work and hardware engineering that laid the foundation for years to come, and much of it had to be done before we could build the core CRM application that inspired us in the first place. No developer has to do that again. No hardware, no software, no back office, no data center -- it is all about innovation, not infrastructure. So when people ask me what is next for Salesforce.com, I say try another question: who is the next Salesforce.com? Because it is that next generation on-demand developer and ISV who is developing, marketing and deploying on our platform and that is what is what is next for Salesforce.com. And that is the story I believe will define Salesforce.com, our on-demand platform strategy, and the on-demand industry in the years to come. With that, I will turn it over to Steve for a detailed review of the financials.

Thanks, Marc, and welcome, everyone. By any measure, our fiscal year ’07 performance was tremendous and Q4 was a fitting way to end such an incredible year: record revenues of $144 million; record customer and subscriber additions; break-even GAAP EPS; and $38 million in operating cash. Before I begin, please be advised that all of my commentary today will be on a purely GAAP basis. With that said, let me begin today with a quick review of our P&L. Fourth quarter revenue of $144.2 million was up 58% from the year-ago quarter and 11% from Q3. For the full year ’07, we recorded revenues of $497.1 million, an increase of 60% from fiscal year ’06. Managing this revenue growth was truly an outstanding achievement for the company. On a geographic basis, revenue in the Americas was roughly $111 million, an increase of 53% from the year-ago quarter, and up 9% sequentially. In Europe, revenue of roughly $23 million rose 77% year on year and 14% from the prior quarter. And at 84% year-on-year growth, Asia-Pacific continues to be our fastest growing region. Fourth quarter revenue of roughly $11 million was up 21% from Q3. International revenue now represents 23% of our revenue versus 20% a year ago, reflecting the investments that we have been making in the past year on our international capacity. Subscription and support revenue of $132.1 million grew 60% year over year and 12% sequentially. Our professional services business, which includes consulting and training, also continued its outstanding growth, closing the year with fourth quarter revenue of $12.2 million, an increase of 41% from the same quarter last year and 5% sequentially. ASPs, calculated as quarterly subscription revenue divided by ending total net paying subscribers, finished the fourth quarter at $68 a month per subscriber. This result was down slightly from Q3’s $71, but this was driven principally by the two large deals late in the quarter that Marc referenced earlier in his comments. Excluding the effect of these two deals, ASP was essentially flat quarter to quarter. As Marc mentioned, Q4 was an incredible customer and subscriber quarter. Our 90,000 net new subscribers in Q4 are almost double the number we added during our outstanding Q4 in fiscal year ’06. Importantly, our customer retention continues to be outstanding. For the fourth quarter and for the full year, our attrition rate continues to be less than 1% of net paying subscribers per month. GAAP gross margin for the fourth quarter was 77%. This is slightly better than our full year gross margin of 76%. We have managed to maintain our gross margin on a year-over-year basis even as we were absorbing roughly $1.5 million in incremental 123R related stock-based compensation expenses in cost of goods sold. Subscription and support gross margins were roughly constant from the year-ago quarter at 88%. Professional services gross margins were down a bit from Q3, primarily because of holidays and the resulting reduction of training and consulting days during the quarter. As a percentage of revenue, operating expenses finished the quarter at 78%, up 2 points from Q3 and up 7 points from last year. We continue to add people and IT capacity in all of our major expense areas. The primary driver of the 7 point year-over-year increase was roughly $8.8 million in incremental 123R stock-based compensation expense. For the full year, operating expenses finished at 77% of revenue, up 5 points from fiscal ’06 and again the result of 123R stock-based compensation. Clearly, our operating expenses represent the key leverage points in our model, but it is important to understand that we are still very much in our growth mode and if we lever our business too quickly in the near term, we create risk in achieving our goal of becoming the dominant on-demand company over the long term. Since most of our costs are driven by people, particularly in the expense categories, let me provide a quick update on headcount. We added 263 people during the quarter to finish the year with 2,070 full-time equivalent heads. This represents an increase of 766 people from the beginning of the year. We have more than doubled our headcount over the past 18 months, adding in every functional area to enable our continued growth and industry leadership. With that said, let me finish up on the P&L by moving to taxes. Our effective GAAP tax rate for the fourth quarter was 68%. That is down from the 79% we recorded in Q3 and driven largely by the reinstatement of the federal R&D tax credit. There is no meaningful year-on-year comparison because of the inclusion of 123R stock-based compensation in our fiscal year ’07 results, but as I have said in the past, because of our growth and profitability in various foreign tax jurisdictions, this number is somewhat difficult to forecast. Net income for the fourth quarter and for the full year was essentially break-even, thus our reported GAAP EPS for both periods was also break-even. Average fully diluted shares outstanding were 121 million shares for the fourth quarter and 120 million shares for the full year. We achieved these results even while we absorbed more than $39 million in stock-based compensation expense and roughly $2 million of expenses related to the amortization of purchased intangibles. We also made important investments in extending our technology and growing our capacity. For these reasons, I was very pleased with our fiscal year ’07 performance. Q4 was another excellent cash quarter for Salesforce.com, with operating cash of approximately $38 million. While this number is essentially flat from the year-ago quarter, please recall that FAS-123R, the tax benefit associated with stock-based compensation now appears in the financing cash, not in operating. This quarter, that tax benefit was roughly $6 million, and for the full year, cash from operations totaled approximately $111 million. This number does not include roughly $16 million in 123R related tax benefit. Together, this results in slightly more than $1 per share of cash generation for the year. All of this cash continues to fortify our balance sheet. Total cash, cash equivalents, and marketable securities finished the year at approximately $413 million, an increase of $41 million from Q3 and an increase of $116 million for the year. Receivables jumped up a bit in Q4, finishing $46 million higher than in Q3. We saw a similar increase last year from Q3 to Q4 and so I expect this number to come back in line during Q1. Deferred commissions also showed a typical year-end increase. Other assets increased to $19 million from $12 million in Q3. This increase was primarily the result of capitalized software and a small increase in our ownership interests in our Japanese joint venture. On the liability side of the balance sheet, deferred revenue finished at $284 million, an increase of roughly 58% from last year and up 29% from Q3. And remember, this is just for the business that is booked and invoiced. For business booked but not yet invoiced, we continue to carry a non-GAAP off balance sheet deferred revenue amount that is slightly more than what you see on the balance sheet. In total, our on- and off-balance sheet deferred revenue is now approaching $600 million. This is a remarkable number when you consider we just concluded a year where we recorded $497 million on our P&L. Before I get on to our official outlook for next year, I would like to discuss an important reporting change for the year. There is no question that subscriber growth is key to our overall growth strategy. However, as we have said before, upgrades and non-subscription services like Sandbox, Apex Mobile, Google Adwords, and now App Store are also becoming a greater part of our overall revenue mix and growth opportunity. Because upgrades and add-ons are a revenue event but not subscriber events, looking at subscriber additions on a quarterly basis is not the best indicator of future performance. At the same time, the magnitude of our deals has grown exponentially. In Q2, our largest account was 7,500 subscribers. In Q3, that number doubled to 15,000 and now in Q4, we have a 25,000 seat customer. That is almost a 400% increase in our largest deal in just six months. Because of the timing of the large deals is still difficult to predict, this creates a potential for greater quarterly lumpiness in a metric that is becoming less predictive than in the past. It is actually the same challenge we faced two years ago. At that time, we eliminated our mid-quarter subscriber updates, going from eight updates a year to four because they are not useful in understanding our true business performance. Today, given our multiple revenue drivers and the fact that the magnitude of our large deals now creates added quarterly lumpiness in the subscriber metric, we similarly believe that quarterly subscriber performance is not the best way to evaluate our business. As such, we will be changing our subscriber reporting frequency in fiscal year ’08 from quarterly to twice annually; once at mid-year in our Q2 report and once at year-end in our Q4 report. We believe that the long-term trends are much more useful in understanding our true business performance and in the best interest of our shareholders. With that said, let me conclude today with our fiscal year ’08 outlook. For Q1, we are now projecting revenue in the range of $155 million to $157 million and GAAP EPS of approximately a $0.01 loss to a $0.01 gain. This GAAP EPS projection is expected to include roughly $11 million to $13 million in stock-based compensation expense and roughly $500,000 of amortization of purchased intangibles. This projection assumes an average fully diluted share count for Q1 of 124 million shares and a projected Q1 GAAP tax rate of 70%. After raising our revenue outlook for our full fiscal year ’08 in December, we continue to expect revenue in the range of $710 million to $720 million. We further expect full year ’08 GAAP EPS in the range of $0.07 to $0.09. Again, this estimate includes an expected $60 million to $70 million in stock-based compensation expense and roughly $2 million in amortization of purchased intangibles. For purposes of calculating these full-year estimates, we project a fully diluted average share count of 126 million shares and a GAAP tax rate for the full year of 60%. To close, by almost every measure, fiscal year ’07 was an amazing year. That concludes our prepared remarks for today’s call. We thank you for joining us and we will open things up for your questions. Operator, please.

(Operator Instructions) Your first question comes from Thomas Ernst with Deutsche Bank. Tom Ernst - Deutsche Bank Securities: Thank you. A quick question for you. First, thank you for reducing some of the sub number volatility. I think that is welcomed by your shareholders. But the question I wanted to ask you is it looks like we accelerated hiring pretty significantly in Q4 off of the run-rate that you had been going, been hiring during the year. I think the outlook here in terms of the cost guidance or the earnings guidance suggests that perhaps this acceleration continues. Why the optimism? Obviously you have been growing quickly already and expanding fast. Are you expecting to continue to hire more aggressively and what gives you the comfort to raise the bar a little bit more on the investment?

Thanks for the question. You know, this is a great time in the on-demand industry. I know that you know that because you cover us pretty closely. We are very excited about the opportunity. We are also very excited about our competitive position and we are also very excited about our new technology. But to take advantage of all of that, we have to have the corporate infrastructure to be able to execute on what are probably the most aggressive goals in the industry. I do not think any software company is growing faster this quarter than Salesforce.com, certainly at our size. We want to continue that momentum. We want to take advantage of the change. We want to continue to accelerate our market share gains and to do all of that, we want to expand our infrastructure, which includes our employee base. Tom Ernst - Deutsche Bank Securities: Marc, just a quick follow-up, was there any specific catalyst that got you excited to ramp hiring, because it looks like it actually started in Q3. What was it that made you decide well, let’s pick up the rate of investment?

We are very optimistic around our competitive position and the development of our pipeline because of the trends that we see in all of our market segments around customers wanting to go to on-demand computing. In almost every geography and market segment that we are in, we are seeing that continued growth. That is evidenced by the report that we just provided you on the state of the company. We want to continue that momentum. We want to continue that growth. We want to continue that acceleration and to do that, we have to be able to continue to add more people and that is what we are doing.

Marc, if I may, Tom, Marc is absolutely right. We are investing into our growth but we as a company have a history of growing our margins over time and we are going to continue to do that through this year. You have seen that in some of our guidance. Certainly we have changed our methodologies to include our stock option expense, and we are aware of that, but that does not change our direction and our management team in terms of proving operating margins and continue to focus on improving cash flow from operations too. We are trying to make those balances, as Marc said, that we have always invested in our growth but at the same time, you are going to start to see us continue our expansion of margins over time.

The other thing I would like to add, Tom, is just getting back to my formal comments, Gardner predicts that 25% of all new business software will be delivered as a service by 2011, and I am sure you saw the dramatic share gain that McKinsey cited in enterprise CIOs who are now willing to implement software as a service. I am sure you will agree no company is currently better positioned to take advantage of those shifts, and these additional employees are going to help us to do that. Tom Ernst - Deutsche Bank Securities: Thank you.

Your next question comes from Brent Thill with Citigroup. Brent Thill - Citigroup: Steve, you mentioned some of the new revenue categories. Can you just give us a sense of maybe how you are going to start to report those categories, and will that start in Q1 or are we going to have to wait until later in the year?

I am sure we will give some indications on how the business is doing but it is still pretty early and we are going to stick with the simplified reporting. It is important to understand we have a lot of levers in this business and there are -- through the platform, the App Store, et cetera, that we have laid the groundwork. We have always had add-ons and upgrades and that is not going to change. We have new products in services and support and we are very supportive of that. Marc talked about the expansion there. So you will see that but I think it needs to become a major part of our business and also it is early days in some of this stuff. Brent Thill - Citigroup: A follow-up for Marc, you mentioned last quarter that price increases you felt fairly confident that the installed base was able to take on a higher price point offering. I think you had limited experience with that price point in the core. Can you just give us a sense of the reception on some of those price increases during the quarter?

Well, as you know, during the quarter we increased Unlimited Edition from $195 per user per month to $250 per user per month, and that was received very well by our customers. Unlimited Edition is one of our most successful new offerings and we have seen a lot of customers, even though it has only been available for about six months, move to Unlimited Edition. We are very optimistic about that and we also see our company releasing editions with higher prices in the future and you may see some of that next Tuesday. Brent Thill - Citigroup: Thank you.

Your next question comes from Jason Maynard with Credit Suisse. Jason Maynard - Credit Suisse First Boston: Just a follow-up on the incremental or additional spending for next year. Could you just give a little more color or flavor on what line items on the P&L we should see this? Is this more cost of service? Is this going to be sales people, R&D? Just maybe directionally, help us understand how we should think about those line items?

We are investing symmetrically across all aspects of our business to take advantage of the opportunity at hand. We believe that now is the time for Salesforce.com to ascend to the market position that it rightfully deserves as a leader in on-demand computing. As the market expands in on-demand computing to these incredible numbers that are being cited by these industry analysts, we want to have a company that has the capabilities to be able to take advantage of the full opportunity and we are creating that company. That is what we have been doing for the past eight years and that is what we see ourselves doing going forward, as now I believe we are at the tipping point of on-demand computing. We want to be at the apex, so to speak.

Jason, I think you will -- certainly we have been making investments and talked about investments in international. That is starting to show up in terms of our business mix. We certainly made investments in development through the platform, Apex, App Store, our own infrastructure. As we get bigger, we need to make some investments in as well, so as Marc said, it is pretty much across the board, but I think there is demonstrated results in those investments through the growth in international revenue streams, through the technology develops. We have had some incredible events where we have released product and technology over the last four to six months. I think you will continue to see that. Jason Maynard - Credit Suisse First Boston: How should longer term investors think about the ramp in operating margins? Is this going to be something where you have a big spending year and then we see some leverage the following year? Or is it going to be a little bit more of a gradual ramp? What does the slope look like over a two- or three-year timeframe?

In terms of that, it is tough to predict. We have got huge opportunities, as Marc has quoted the size that Gardner and others have had in the marketplace. Like I said in the script and in earlier responses to questions, you have seen us move our margins up year over year in a managed way. We are going to continue to do that but not at the expense of our investments. It is true that as we get larger you are also going to see continued improvements in cash from operations. A little bit better than $1 per share this year is pretty exciting. We had over 20% of our revenues converted to cash. I think you will see us continue to focus on growing that, but it is hard to give an estimate of what those numbers could look like in a couple of years.

I would also just say that unlike a lot of enterprise software companies today, Salesforce.com is a top line oriented company. We are focused on growth and revenue and we are a market share oriented company in a new market. We are really organized and architected around those principles. If at some point we decide to maximize our margin or maximize our efficiency like you see some of these large players do, I think that would be a sign that our market is shrinking or maturing, or that there is a phase shift happening in our technology cycle. But en contrare, we really have found that this is the time for on-demand computing and there is no other company who is delivering technology in this space to satisfy customer needs, whether they are small, medium and large. But to do that, we have to have the company in sales, in services, in consulting, in development to take advantage of the opportunity, and that is the company that we have created and that is the company that we will continue to create. Jason Maynard - Credit Suisse First Boston: Thank you.

Your next question comes from Brendan Barnicle with Pacific Crest Securities. Brendan Barnicle - Pacific Crest Securities: Marc, as you head out on all these new initiatives and they are definitely expanding the on-demand market, how do you make sure that you stay true to the core SFA CRM focus of the company’s original applications?

Well, that is a great question and at our company, we like to say that all of our wood is behind the same arrow. You have probably noticed we have not changed our company name. It is still Salesforce.com, and we have not changed our stock tickers either. It is called CRM, and that is just the beginning of a clear indication to our customers that we are the defined leader in customer relationship management. If you look at a couple of the transactions that we closed this quarter, whether it was the large transaction that we mentioned at 25,000 subscribers or Dell at 15,000 subscribers, or the transaction that we mentioned in the previous quarter with Cisco at 15,000 subscribers, or over the I guess approximately 50 companies that have over 1,000 subscribers with us, let me just mention; when was the last time you hear Oracle or SAP say that they closed a 25,000 user CRM deal? Or when was the last time you heard Microsoft say they closed a 25,000 or 15,000 user CRM deal? Or can you name a customer who has 1,000 users on any of our competitors’ platforms in customer relationship management that has the customer satisfaction level? I get back to some of the core tenets of our technology and if you look at the Winter ’07 release that we just revealed and delivered to all of our customers a couple of weeks ago, I think you will find that customers have seen it has more core CRM capabilities, is more competitive, and is leading perhaps more than any release we have ever had. In fact, it just won a rave review from InfoWorld. If you do not read InfoWorld, it is on infoworld.com. You can search on the Winter ’07 Salesforce.com release. If you are not aware of it, InfoWorld today is the most demanding technical center out there for reviews, and we have done some incredible new technological developments, whether it is our integrated mash ups or our hovers, whether it is our mobile technology. Customers I believe define us as the leader today in the customer relationship management and we are continuing to make that investment. That said, what makes our CRM really differentiated and really better than our competitors is our platform. Our platform functionality is fully integrated into our CRM technology so customers can easily customize and create as well as add over 520 applications from the AppExchange. We believe there is no other product in the world that is like that and that is what makes our CRM the best. Brendan Barnicle - Pacific Crest Securities: Great, and just a quick follow-up question for Steve on ASP assumptions going forward. We saw that bit of a decline. You noted it was on the big deals but you guys are doing more big deals. Is this seasonality where in the fourth quarter we should expect the big deals to come and maybe see that decline and see them return back to the level going forward, or you think we see these big deals fairly consistently through the future quarters and kind of remain at these levels?

Well, a couple of things, Brendan. As Marc said, the pipeline looks very good and we are optimistic about that going forward. As well, Q4 is the time for big deals and timing, whether it is Q4 or Q1, when a deal comes in is really critical. Those tend to come in at the end of a period, so you will get the subscriber count but not necessarily all the revenue. I still like to say that our ASPs are trading in a narrow historical range. As our base gets bigger, it gets harder to move those things around, so I would like our range in the high 60s, low 70s. It moves it along. Certainly we are introducing higher priced products and great opportunities there, but it is about the timing of this and that is another reason not to get too focused on the subscriber number at the end of every period. But I would say that it is going to trade in the range that we have been trading at historically. Brendan Barnicle - Pacific Crest Securities: Thank you.

Your next question comes from Peter Goldmacher with Cowen. Peter Goldmacher - Cowen & Co.: Just following up on that last question, it is interesting to me that your subscriber growth was phenomenal but your revenue growth lacked the out-performance the subscriber growth. Steve, I am a little bit confused on your comments. Are you implying that the discounts that you give to the enterprise are roughly in line with what you are generating from the mid-market business? If they are not, can you give us some sense of what the general 15,000 plus seat deal discounts trend towards? Thanks.

Peter, that is a good question. As you know, we have businesses in small, medium and large and they each generate different types of discounting structures. Clearly we are discounting for larger volumes. A big impact on the ASP, quite frankly, is the timing of when these transactions occur and the revenue that we recognize, not so much the discounting structure. It has not changed. On a per discussion basis, we do not talk about the discounts at that level. Peter Goldmacher - Cowen & Co.: Can you give us just a little bit of help understanding what the potential difference in discount is? Is it a 20% difference, 30%, more?

What I can tell you is that of course, if you buy more product, you get a higher discount because our costs to acquire that customer are reduced, of course. And larger customers have larger discounts; smaller customers have smaller discounts, but we do not provide our discount range for competitive reasons and we will not be doing that. Peter Goldmacher - Cowen & Co.: Thank you.

Your next question comes from Christopher Sailer with Goldman Sachs. Chris Sailer - Goldman Sachs: Just diving a little bit deeper on the cash flow, it seems like that is going to be a much more important metric for investors going forward, given that subs, as you point out, is more volatile and we are only going to be getting that metric a couple times a year. I guess the question is there. It looked like the cash flow margins for the year came down a bit and that might be in part because of some big deals at year-end and the fact that those did not necessarily collect the cash. But I guess going forward, would you expect the cash flow to grow at a rate similar to overall revenue or is that also going to be pressure because of the investments that you guys are making?

Well, you know, Chris, that is a good question. As you know, we are still in growth mode, so predicting cash flow has always been tough and I have not given any guidance around that. I think it is safe to say that clearly we are focused on it as a management team. We think that converting our revenues in the 20-plus or greater range into cash is a good number, but we are still adding facilities, adding people throughout the world and it is still going to be a lumpy number, so I cannot give you too much guidance. But history is a good indicator of where we have been and what we are doing. Chris Sailer - Goldman Sachs: So you wouldn’t expect it to diverge much from where it has been the last few years?

Not over time, but keep in mind where we find opportunities to grow, we are going to do that, so there is some lumpiness there. Chris Sailer - Goldman Sachs: Thank you.

Your next question comes from Kash Rangan. Kash Rangan - Merrill Lynch: Thank you very much. A question for Steve. When I take the midpoint of your GAAP EPS guidance and add back in the stock-based comp, I come up with, maybe I did the math wrong, but I come up with roughly 11% to 12% operating margin and that versus what you reported in fiscal 2007 of roughly 7.5%, is a pretty substantial margin increase. Am I doing the math wrong here?

You know, Kash, we are just focused on the GAAP earnings because there are tax rate issues and a lot of other tricky maneuvers that make doing that type of comparison difficult. I will leave that to you and your colleagues to sort that out. We are very proud of the break-even that we had with the 123R costs in there. We feel comfortable with what we are doing next year in terms of margin expansion, but I will leave that math to you guys because it is very difficult to do. Kash Rangan - Merrill Lynch: I understand that but directionally, it looks like the last couple of years, this will be the largest margin expansion year for you guys in fiscal 2008 when I look at your guidance, based on what is implied through EPS.

I would just say that what we have done is push the reset button and we are looking at GAAP now, and I think you ought to look at our energies around improving our margins on a GAAP basis.

I would just add to that that we are delighted with our revenue growth, with our margin growth, with our customer growth, with our subscriber growth, with our system availability, with our -- really, every core metric of our business, we couldn’t be more pleased with where we are and we are very satisfied and in many ways ahead of even where we thought we would be at this time. We think this was an incredible year. Kash Rangan - Merrill Lynch: Marc, longer term, which operating line item are you going to get the best margin improvement from? Should it be sales and marketing or gross margins?

Well, as I have said on previous calls, when you are staffing up a deferred revenue company, specifically with a large direct sales organization which is now what we have, you are going to have to on-board a substantial amount of costs because when you hire a new sales person, the industry average is that person will be productive after about nine months, or after about three quarters. What is interesting about that is for a traditional enterprise software company who takes the revenue in the period that it occurs or gets signed, like an Oracle or an SAP or a Microsoft, that nine-month cost and the risk associated with that new hire gets rationalized in that quarter that they start to get delivering the revenue. But in the deferred model, of course, we have ratable contracts so the revenue does not happen or a very small part happens in that third quarter. It happens over the life of the agreement, so you have more on-boarding costs for those sales people, which can include acquisition costs, draws and other things. So when you are building an on-demand company with a deferred model and where you are expecting a high-growth rate like we have achieved in the last eight years, indeed, you will have to be ready to take a heavy cost in sales, which is what we have.

We are going to keep investing in R&D. We have some great technology. We still have our international expansion, so all of those are in our future and for the foreseeable future. Kash Rangan - Merrill Lynch: Steve, you said we should be looking at the business through up-sell, cross-sell, et cetera, so then in lieu of the sub number, are you going to be sharing with us more metrics? First off, just going to a once in two quarters sub number I think would increase the volatility relative to expectations because you are talking two quarters accumulation of people’s expectations for the sub number, but that is a completely different issue. Since you have chosen to not give us the number, what --

Hello?

Operator, I think we will need to go to the next question.

Your next question comes from Mark Verbeck with Cantor Fitzgerald. Mark Verbeck - Cantor Fitzgerald: Steve, in the past couple of years, Q1 has actually been on an absolute basis a stronger grower than Q4. I think probably all of the deals that you do in Q4 spill over. Any change in that expectation this year? Did the ultimate pricing special pull revenue forward, so we shouldn’t expect the same kind of seasonality this year?

I don’t think there is anything unusual that is reflected in our guidance for what we are doing. We feel very comfortable about our business. We do run our business based on revenue and we feel strongly about Q1 and what we are going to deliver beyond that. Mark Verbeck - Cantor Fitzgerald: Another question, just in terms of how you guys think about how much cash the company should carry and where you might be making investments. As you continue to generate phenomenal amounts of cash flow, how do you think about how much you need to keep on the balance sheet?

Well, we certainly look at what we are doing with our cash. We are still a growing company so I think you will see us stay focused on improving cash from operations, continue to grow our cash balances to allow us to be flexible and take advantage of either internal growth opportunities or external growth opportunities, but it is a little bit premature to sit and say we are going to do something unique, unusual or different with our cash right now. Mark Verbeck - Cantor Fitzgerald: Thank you.

Your next question comes from Dan Cummins with Bank Of America. Dan Cummins - Bank Of America: I wanted to cover the traction you are finding in Europe. Can you give us a sense of, not naming the customer but size it for us; what would be the size of the largest customer in Europe right now and what will that be in six months and perhaps a year out? Also, with respect to pricing, the fact that these deals seem to have been signed in January yet you are keeping the revenue guidance I think unchanged relative to what you had in December. Are we at a significantly higher degree of conservatism on the guidance? Can you give us a sense of what SKU all these large deals are coming at? Are these indeed Unlimited Edition seats or are they Enterprise or are they Professional?

First of all, if it is all right with you, I am not going to tell you what our large deals will be in the coming quarters because I do not think that will be good for our competitive position or our shareholders. What I can tell you, of course, is all geographies are growing. I am sure that is clear through Steve’s remarks as well. We have seen some great wins in Europe and also in Asia and of course, Japan. We see the on-demand industry emerging in all geographies and we are working hard to play in all geographies as well, as you know, our product already operates in more than 12 languages. In terms of future direction of our growth and how we see our revenue, we have provided our guidance just as we have always have. When we are ready to make a change to that guidance, we will do that through a formal and structured way.

Your next question comes from Brad Whitt with RBC Capital Markets. Bradley G. Whitt - RBC Capital Markets: Steve, if I did my math correctly, it looks like cash flow from operations grew about 16% year over year and free cash flow grew about 23% year over year, which obviously is lagging the revenue growth, which you mentioned you continue to want to make investments there. I am just wondering, should we use this history as an indicator for free cash flow going forward over the next couple of years?

Like I said, you have to look at a little bit of history but also know that we are going to take opportunities to make investments, and that is why we have not been giving guidance or providing insight there. I will tell you that we are focused on improving cash flow from operations as we are on margins, as we are making our investments, so I will leave that to you to decide where you think we will go there, but cash and cash flow from operations is an important metric that we manage too. Bradley G. Whitt - RBC Capital Markets: Okay, and then a quick follow-up, on the last conference call, someone asked about churn and you said you normally only address that one time a year and maybe to stay tuned to Q4. I am wondering if you could give us an update on customer churn for this last previous fiscal year.

As I said in my prepared remarks, right now we have seen our churn at less than 1% of our total customer base on a monthly basis. The implication there is that it has been relatively flat and we think very good in terms of turnover. We have small businesses that go out of business, et cetera. We continue to focus on customer success and that metric has been very stable over the last year or so.

Your next question comes from Yun Kim with Pacific Growth Equities. Yun Kim - Pacific Growth Equities: Thank you. What kind of change do you see in your sales organization going forward as you see continued traction in the enterprise market with a higher number of larger deals and also you continue to focus on AppExchange and Apex. Do you see your sales organization becoming more vertically focused for both SMB and the enterprise accounts? Just give us some sense on how you are thinking about the way you are planning to grow your sales organization for both enterprise and SMB. Then, just quickly, do you have any plans to pursue any indirect sales model, like building out value-added resellers for the SMB market? Thanks.

Our channel is our direct sales force and that has worked incredibly well for us. We are competing against organizations who have large established direct sales organizations like Oracle and SAP, and to compete against them and their mainstream accounts, we have to have similar armies and soldiers. I am sure that it is clear that two of Oracle’s very largest high-tech accounts, Cisco and Dell, just decided to go with Salesforce for their large enterprise application deployment. That competition takes place in person in their offices at the highest levels of their company and we have to be able to be prepared to present and represent ourselves in a peer manner. That is our distribution model and, of course, we won those customers away from Oracle. When we look at other channels, the one that we are most excited about is App Store, which is of course the announcement that we made in December. We see App Store as the development of a new channel of revenue for us. It is based on our AppExchange technology. We plan to offer a revenue-sharing model for partners starting this fiscal year that we are very excited about and we have gotten a great response from our partners. Also, we will have an electronic version of App Store available before the end of this fiscal year that we also think could become an interesting channel for us as we will be selling our partners’ applications and taking a significant revenue share from that. That is really the development of the channel that we see today. We do not see that traditional reseller. We see a new type of reseller relationship, as I just described. Of course, we also have great relationships with companies like Accenture and IBM and Deloitte who are systems integrators, and we have really cracked the code on value in these relationships. We have worked and signed some major transactions with all of those partners and that has become also an important relationship channel for us, but still that is because our direct sales organization is able to partner with them in a peer manner. Yun Kim - Pacific Growth Equities: Thank you.

This concludes today’s conference. I will turn the call back over to Mr. Havlek for closing remarks.

Thanks, Melissa, and thank you, everyone, today for joining us. I would like to remind everyone to listen in next Tuesday to the webcast of the exciting New York event that Marc mentioned in today’s call, and finally, if you have any follow-up questions on our fiscal fourth quarter, please contact the investor relations team at investor@salesforce.com. Thank you very much and have a great day.

This concludes the fourth quarter fiscal year 2007 financial results conference call. You may now disconnect.