David Havlek - VP of IR Marc Benioff - Chairman and CEO Steve Cakebread - CFO Graham Smith - CFO Designate

Kash Rangan - Merrill Lynch Laura Lederman - William Blair Brent Thill - Citigroup Brendan Barnicle - Pacific Crest Securities Nathan Schneiderman - Roth Capital Partners Richard Baldry - Canaccord Adams Philip Rueppel - Wachovia Securities Derrick Wood - Pacific Growth Equities Peter Goldmacher - Cowen & Co

Good afternoon. My name is Jamaria and I will be your conference operator today. At this time, I would like to welcome everyone to the Salesforce.com fourth quarter 2008 financial results conference call. (Operators instructions) Thank you. I would now like to turn the conference over to Mr. David Havlek, Vice President of Investor Relations. Please go ahead sir.

Thanks Jamaria, and welcome everyone to today's call. Earlier today Salesforce.com released results for its fiscal fourth quarter. A full disclosure of these results can be found in our fourth quarter results press release as well as in our form 8-K filed with the SEC. Additional financial information beyond what is provided in the press release may also be found on our website. Joining me today to discuss our outstanding fourth quarter performance, is our Chairman and Chief Executive Officer, Marc Benioff and Chief Financial Officer, Steve Cakebread. In addition, I'm also very happy today to welcome our CFO designate Graham Smith for today's call. Graham will close our commentary today with our outlook for fiscal '09 and then we'll open things up to your questions. Before we begin a couple of brief housekeeping items. First all of our financial commentary today will be in GAAP terms unless otherwise noted. Next let me remind you that the primary purpose of today's call is to provide you with information regarding our fourth quarter fiscal year 2008 performance. However some of our discussions or responses to your questions will contain forward-looking statements. These statements are subject to risks, uncertainties and assumptions. Should any of these risks or uncertainties materialize or should our assumptions prove incorrect, actual company results could differ materially from these forward-looking statements. All of these risks, uncertainties and assumptions as well as other information on potential risk factors that could affect our financial results are included in our reports filed with the SEC including our most recent report on Form 10-K and Form 10-Q particularly under the heading 'Risk Factors'. I also remind you that today's call is being webcast and a replay will be available shortly following the conclusion of the call through March 7. To access the press release, the financial detail, the webcast replay or any of our SEC disclosures I encourage you to visit our investor relations website at www.salesforce.com/investor. Lastly please be reminded that any unreleased services or features referenced in today's discussion or in other public statements are not currently available and may not be delivered on time or at all. Customers who purchased our services should make decisions based upon features that are currently available. With that, let me turn the call over to Marc to tell you about our excellent fourth quarter.

Thanks, David. Our outstanding fourth quarter performance was the perfect way to cap off a monumental year for Salesforce.com. Businesses of all sizes and virtually every industry all over the globe are adopting software-as-a-service over failed legacy clients over alternatives like never before by becoming the world's first multi-application, multi-category, software-as-as-service company in fiscal year '08. We extended our industry leadership and achieved some remarkable milestones during the year. Specifically, in all we added more than 11,000 new customers during the year more than we had after five years in business. In December, we celebrated our $1 million net paying subscriber and we exit the year with nearly $1.1 million subscribers; that's roughly 450,000 more subscribers than we began the year or roughly 1800 every business day. Even more exciting, we raised the bar for Cloud Computing and became the first multi-category on-demand company by introducing the world's first Platform-as-a-Service Force.com though being deployed and running the customer on-demand applications has never been easier than just today with Force.com. Our deployments also reached record new scale in fiscal 2008 with more than 60,000 subscribers. Our largest deployment today is more than twice the size of our largest deployment just a year ago. And because customers are using the Force.com platform for deep customization and integration, system usage reached unprecedented new heights during the year. In total, we delivered more than $29 billion transactions at more than 99.9% availability for the year and daily transaction volumes now exceed $130 million. We also delivered on our commitments to innovation in our applications last year. After Gartner recognized our SFA application as an industry leader and our customer service application as visionary we added two powerful new applications Salesforce Content and Salesforce Ideas and our strategic partnership with Google yielded one of our most successful new products in our history. Salesforce group division featuring Google apps work. The AppExchange Ecosystem grew to include more than 800 applications established within itself as the foremost marketplace for on-demand applications. Our development community now includes more than 700 partners and the VC community is taking notice. Total venture capital funding for AppExchange partners now exceeds $425 million. And finally we also achieved some pretty amazing financial milestones in fiscal year '08. We broke through the $600 million, the $700 million and the $800 million annual revenue run rate levels during the year and today we are confirming outlook for our first ever billion dollar revenue year. These milestones are not just remarkable achievements for Salesforce.com but further prove that the webcast here represents the important inflection point for the software service industry. Organic growth in the software industry is increasingly coming from a new generation of on-demand companies led by Salesforce.com. Nothing demonstrates this fact more than our incredible fourth quarter. Now, I would like to briefly review our financial performance for the fourth quarter. Revenue for the fourth quarter was approximately $217 million, an increase of 50% from the year ago quarter. For the full year, revenue rose by 51% to approximately $749 million. When you factor out the pending acquisition of BEA by Oracle, Salesforce.com is now the 14th largest market cap software company in the world. That's amazing in just our 9 year and as fast as revenue is growing profits and cash flow are growing even quicker. Our GAAP operating margin of 4.9% for the fourth quarter was up more than 6 points year-over-year and was our best performance ever that fueled $0.06 of GAAP earnings per share for the quarter and GAAP EPS of $0.15 for the year. Even more incredible was our cash generation. Operating cash flow in the fourth quarter was $81 million, an increase of a 112% from the year ago. For the full year, we generated more than $204 million of operating cash and we now have roughly $670 million of cash and marketable securities on our balance sheet. By any measure, the fourth quarter was amazing. The driver of this financial performance was the most incredible quarter of customer success in our history. We are a winning business and virtually every industry vertical in all geographies and some of the most influential companies in the world. As we announced on our last call, Citigroup that our fourth quarter is off to a fast start by signing with us in early November. They are developing a new wealth management desktop to enhance their client advisor relationships and Salesforce.com beat Oracle to be a core piece of that strategy. In all, more than 30,000 wealth managers and loan professionals at Citibank will soon be enjoying the benefits of Salesforce.com. I'm also excited to announce today that Aon has become our seventh customer to top the 10,000 subscriber thresholds with more than 11,000 subscribers. Also a direct win against Oracle, Aon was a pioneer by becoming one of the first enterprise customers to deploy Salesforce.com at scale and today they remain one of our most sophisticated customers. It's been exciting to watch them grow. But our success in financial services was not limited to Citi and Aon. During the fourth quarter, private financials selected Salesforce.com over Oracle and First Citizens Bank & Trust chose Salesforce.com over Microsoft. We also won significant new opportunities at Lincoln Financial, Genworth Financial and as we announced last month at AIG Casualty. In some of our largest financial services customers grew even larger this quarter with subscriber addition or upgrade activity at Mizuho, Sampo, Wells Fargo, Thompson, Hartford Life, GMAC, AmeriCredit and Alliance to name a few. In the telecommunications market, we are winning on a global scale with large new deployments at [Hawaii] in the United States, [Coke] Communication in Europe and (inaudible) Communication in Asia. The Hawaii win was a 9000 subscriber Siebel replacement for partner management making them one of our top ten subscriber deployments in the world. These companies join other telecommunication giants like Nokia, Motorola, Qualcast, Sprint and Bell Canada already using Salesforce.com. And as we mentioned last month, Comcast joined the Salesforce community during the fourth quarter with 1200 subscribers. We also won add-on business during the quarter at another cable giant TimeWarner. We are also creating success in healthcare, pharma and biotech markets. I'm thrilled today to announce that Genentech and IMS Health have both become top 50 subscriber customers for the quarter and Hospira has become a top 100. In media, NBC universal, Readers Digest and Dow Jones joined our ranks in Q4 adding in already long list of media companies in the Salesforce.com. And our already strong technology vertical got even stronger this quarter. We beat Oracle the one substantial new business its storage leader EMC. We also added new business at Compuware, Actuate Advent, [Careman] and Fuji Xerox. These great new technology customers join other industry leaders like Cisco, Del Semantic and a Dobie already using the Salesforce. And finally, I want to highlight our growing space in Europe because I think it's important for you to see that the investments we have been making in that region are really paying off. In addition to the [Coke] communications deal I just mentioned I'm thrilled to announce the data tripping giant DSV has become our fifth internationally based customer to become a top 20 subscriber customer. We also won larger opportunities in Europe at (inaudible) [Fortis and Pando]. Steve will discuss the geography numbers in a moment but Software-as-as-Services is a powerful trend that is clearly gaining global momentum. This momentum will be on full course at our Dreamforce Europe in London on May 7 and 8. We are expecting 2000 attendees and fantastic keynotes from Wikipedia founder Jimmy Whales, the magician and Witness Chairman Peter Gabriel. Please join us in London on May 7 and 8 for the unique mix of customer successful innovation that will define Dreamforce Europe. In addition this quarter we added roughly 2900 new customers and approximately 11,000 customers for the year to end up at approximately 41,000 net paying customers. Perhaps nothing demonstrates our success of those customers more than the growth and their deployments. Two years ago our largest customer had roughly 5000 subscribers and we built a handful with more than 1000 subscribers. Today, we have 15 customers with more than 5000 subscribers and 86 customers with more than 1000. The common thread in all of our customer success and momentum is the Force.com Platform-as-a-Service. I'm often asked when our platform strategy is going to payoff. The answer is today. The platform is the winning deals for us in applications and trading new markets for us. The platform enables us to deliver superior customer relationship management applications and enables our rapid innovation and it opens up huge opportunities for customers to develop and deploy custom applications. That is why our customers are so diverse and why our win rates remain so high. It's a big trend these days and information technology is Cloud Computing and Salesforce.com is the leader and putting the Cloud to work for business. The Force.com Platform-as-a-Service is giving developers everything they need to develop, test, deploy and run after the service. It starts with our secure, reliable trusted global infrastructure now it delivering and establishing $130 million transactions daily at well under third of a secondish. This scalable infrastructure has served out more than $29 billion transactions over the past year. On top of that we offer Database-as-a Service capable of serving over 160,000 sequel statements per second to our customers. Workflow-as-a-Service powering more than 7 million customer credit workflow rules. Integration of this service allowing deep integrations with everything from legacy applications to cutting edge web services our API accounts for more than half of our transactions, which totaled nearly $9 billion in the quarter. Logic-as-a-Service with Apex Code since Apex Code went live this fall developers have written 1.1 million lines of Apex Code and 25 million transactions have already used this powerful service. User interface-as-a-Service with Visualforce. Already developers have ceased the opportunity to create over 5800 unique interfaces with our service and as we launched just a month ago in San Francisco, our latest breakthrough Development-as-a-Service with our Sandbox Metadata API, and code sharing capabilities developers around the world now, it's really just an idea and an internet connection to use the same powerful infrastructure that we worked so hard for nine years to create. We think that this will forever solve the corporate application backlog. For developers and ISVs, it means a new era of innovation not infrastructure. For CIS, it is a chance to breakaway from client server, break (inaudible) and add real business value and for competitors it's clearly the end of software. The Force.com Platform-as-a-Service in fact this is our Cloud Computing Architecture which is business with everything they need: the bill, test, deploy and run apps in the lab. And we are talking about a wide range of apps that those companies rely on everyday to those that are infrequently used. Just a month ago, we introduced new utility pricing to encourage companies to develop those apps just $0.99 a login that's why more than 68,000 developers from around the globe are already finding new and innovative ways to use the Force.com Platform-as-a-Service. Customers have already created a remarkable 64,000 Apps on Force.com that's amazing innovation and we are taking this message to a community that is hungry for innovation. We just kicked off Tour de Force our global developer roadshow in San Francisco. And we will be coming to four cities in April. Atlanta on the 8, Chicago on the 10, New York on the 16 and Boston on the 22. I encourage you to join us for these phenomenal events. The final element of our Force.com Platform as-a-Service is the AppExchange. The AppExchange is providing the ISVs a marketplace to connect with our 41,000 customers, roughly 1 in 4 Salesforce.com customers have already deployed an application from the AppExchange and the total number of installations now exceeds 42,000. During the quarter, we also enhanced our outstanding management team by adding two great new executives. First I'm thrilled to welcome Polly Sumner to the Salesforce.com. Polly joined us last month as President of Platform Alliances and Services with more than 30 years in the industry with leaders like Oracle and IBM. Polly is the right person to take our platform and partner initiatives to next level and her experience in managing the customer experience will be invaluable on our service based culture. We are also very fortunate to welcome Graham Smith in his new role as Executive Vice President and Chief Financial Officer designate. You will be hearing from Graham in a moment. He is a veteran of the software industry with more than 20 years of experience, most recently at CFO of Advent software. Like Polly, Graham also spent many years at Oracle. He has been working with Steve Cakebread to transition into his role since joining us in December and I'm thrilled that after the CFOs transition is complete Steve will continue to do the experience and leadership to spearhead some of our strategic growth initiatives in his new position as President and Chief Strategy Officer of Salesforce.com. Our management team has never been stronger. Before I close, I want to congratulate all of our employees on an amazing year, all these success, the direct result of your hard work and execution and while we have achieved a lot of milestones in FY'08 I'm looking forward to the biggest milestone in our history expected next year $1 billion in revenues the first Software-as-a-Service company to achieve that goal. With that now let me turn things over to Steve and Graham for a closer look at the numbers.

Thanks, Marc. Good afternoon everyone. Q4 was a great quarter. It's tremendously gratifying to see all of our hard work the past few years show so clearly in our performance. Let me begin with the brief review of the P&L. Revenue for the fourth quarter was $216.9, an increase of 50% from a year ago and up 13% sequentially. For the full year, revenue increased by 51% from the prior year to $748.7 million. While growth was strong in all regions of the world growth was particularly strong internationally. In Europe, Q4 revenue grew 70% from the year ago quarter to $38.4 million. At this level, Europe is running at an annual revenue run rate of roughly $150 million. In Asia, Q4 revenue up $20 million grew even faster at 85% year-over-year. While our investments in infrastructure and awareness building internationally continue to payoff the overseas opportunity still remains largely untapped. Finally for the fourth quarter revenue in the Americas rose 43% from a year ago finishing at $158.5. For the full year, we did more than $0.5 of business in the Americas alone; that's more than we did all globally in FY'07. With more than 90% of our business being subscription and support it is no surprise that the growth for that business was essentially the same as the company as a whole. Q4 subscription and support revenue up $196.5 million rose 49% year-over-year and 11% sequentially. For the full year, subscription and support revenue top $680 million, an increase of roughly 51% versus the prior year. Our outstanding customer satisfaction levels continue to result in excellent customer retention. For the fourth quarter, our attrition rate was once again less than 1% of net paying subscribers per month. Our professional services business also had an outstanding quarter growing revenues by 68% from a year ago quarter and 24% sequentially to $20.4 million. Well our training business continues to grow relatively in line with the overall company. Our consulting business grew more rapidly this quarter. Higher net gross was the recognition of EITF0021 related to deferred revenues. In part it was a simple fact that we are starting to grow until the large amount of capacity that we have added in recent quarters. One final comment on revenue while we are winning big deals like never before our mix of revenue between small, medium and large businesses continues to remain at roughly 1/3rd, 1/3rd, 1/3rd just as an expense since we went public nearly four years ago. We continue to believe that this diversification is strategically important because it expands our addressable growth opportunity, while reducing our risks. The company GAAP gross margin for the fourth quarter was approximately 78% this is up nearly 1.5 points from Q3 and up 2 points from last year. While service delivery gross margins were up a bit from Q3, they remained essentially flat year-over-year. The biggest drive of gross margin improvement both sequentially and on a year-on-year basis was the improved performance in our consulting business that I mentioned earlier. For the full year, our gross margin performance of roughly 77% was up a 4 point from fiscal year '07. Operating expenses continue to grow more slowly than revenue and as a result Q4 operating expenses, as a percentage of revenue fell to 73% down 4.5 points from the year ago quarter. For the full year, operating expenses fell almost 2.5 points to finish at approximately 74%. The biggest driver of the Q4 improvement continued to be sales and marketing, where expenses have fallen 3 points, as a percentage of revenue compared with the prior year and R&D finished the quarter at the year roughly 8% of revenue and continues to be well within our target range of 8% to 10%. And finally G&A was down more than a half a point, as a percentage of revenue versus a year ago quarter. This reflects continued operational efficiencies. On headcount, we finished the year with roughly 2,600 fulltime employees; that's up a 145 from Q3 and for the full year we added more than 530 net fulltime employees across all functional areas. GAAP operating margin for Q4 was 4.9% up a 170 basis point sequentially and up more than 600 basis points from Q4 of last year. For the full year, operating margin was 2.7% up 340 basis points from fiscal year '07. And we remember we achieved these fourth quarter results, while absorbing roughly $16 million in stock-based compensation and roughly $1.3 million in amortization of purchased intangibles. For the full year, our GAAP results included approximately $55 million in stock based comp and roughly $5 million in amortization of purchased intangibles. Operating margins are really starting to show the benefits to scale and the leverage potential in our business. We continue to deliver outstanding revenue growth and solid operating margin expansion at the same time. Our effective GAAP tax rate was approximately 48% for Q4 and approximately 51% for the full year. GAAP net income for the fourth quarter was $7.4 million, our best performance ever since implementing FAS 123R. For the full year, we delivered more than $18 million of GAAP net income and diluted GAAP EPS of $0.15. Operating cash generation for the fourth quarter was $81 million, an increase of 112% year over year. Not only was this an all time high for the company but it beat the previous high that we achieved just last quarter by an amazing 55%. While expanding profitability continues to be a strong catalyst for cash generation, we also recorded record collections of more than $250 million during the quarter. And I want to thank the field operations and collections team for making this happen. For the full year, operating cash flow was approximately $204 million, an increase of 84% from fiscal year '07. Net of approximately $8.4 million in capital spending, free cash flow generation for the fourth quarter was approximately $72 million up 69% sequentially and a 137% year-over-year. For the full year, free cash was approximately $161 million up 80% from fiscal year '07. All of the cash generation pushed total cash short, long-term marketable securities to approximately $670 million; that's an increase of nearly $100 million from Q3 and an increase of more than $250 million from a year ago. Despite our excellent collections during the quarter, receivables increased by 80% from Q3 to $220 million. In addition to the normal seasonality associated with a large number of renewals this time of the year our strong new business in the fourth quarter added to these receivables. This strong demand also resulted in short and long-term deferred commissions on the balance sheet. Before I move over to the liability side of the balance sheet I want to mention yet another financial milestone for Q4. Total assets are now more than $1 billion for the first time in our history, an exciting achievement for Salesforce.com and another first for on-demand industry. Now on to the liabilities. Strong new business pushed total deferred revenue to $480 million, an increase of 41% sequentially and an increase of 69% year-over-year. As importantly our unbuild revenue of balance sheet continues to be larger than the build deferred revenue on the balance sheet and together our build and unbuild deferred revenue now exceeds $1 billion for the first time in our history. This is a tremendous milestone and gives us a very solid foundation heading into next year. This was an amazing year in virtually everyway Q4 was a perfect way to close out the fiscal year '08. We delivered unprecedented results, excellent execution, rock solid financials and I'm looking forward to taking on my new responsibilities in contributing even more amazing fiscal '09. With that I'll turn it over to Graham to talk about next year.

Thanks, Steve. Good afternoon everybody. I'm really excited to join the Salesfroce.com. Obviously the CFO role here is a great opportunity. But ultimately my decision to join the company was based on a very few important factors. First there are two camps in software today, the consolidators and the innovators and I want to be on the side of innovation by seeing what we can do for customers with Software-as-a-Service and Platform-as-a-Service and I believe we are only beginning to see the scale of the opportunity here. Next Salesforce.com has been and continues to be the leader in both vision and execution in this exciting market. And finally I know Marc for close to 15 years and there is no more passionate leader in our industry. I joined the company in December and have been working with Steve on a seamless transition of the CFO responsibilities. Steve has built a great team and I'm really looking forward to working with them and with all of you in years ahead. With that let me discuss our outlook for fiscal '09. Customer enthusiasm and demand for our services has never been better. This strong demand together with Salesforce.com brand customer success and best-in-class software and Platform-as-a-Service offerings continue to position us very well heading into the New Year. In that context I'm very pleased that my first formal communication with you today is to raise our full year revenue outlook for fiscal '09. For the full year, we are now expecting revenue in the range of $1 billion and $30 million to $1 billion and $35 million. The cost growth and leadership are our top priorities. We'll continue to invest across all areas of our business in the year ahead. This includes continued hiring in many key areas adding a new datacenter in Asia and growing the infrastructure necessary for continued market leadership. At the same time, we expect to achieve roughly 300 basis points of operating margin improvement during the year resulting in an estimated fiscal '09, diluted GAAP-EPS approximately $0.32 to $0.33. This estimate assumes that our tax remains unchanged from the fourth quarter at 48% and assumes an average fully diluted share count of a $125 million shares. It further assumes approximately $82 million in stock-based compensation and $5.3 million in amortization of purchased intangibles. For the first quarter, we expect revenue in the range of $233 million to $235 million and diluted GAAP EPS in the range of $0.06 to $0.07. Tax rate of 48% approximately $17 million of stock-based compensation and approximately $1.3 million in amortization of purchased intangibles. We expect average fully diluted shares outstanding to be roughly $124 million shares in the first quarter. Before we close I would like to update you on our plans for subscriber reporting in the year ahead. The services that ranges in price from $5 to $250 per user per month to $0.99 a login. The subscriber metric is no longer as meaningful as it once was. However, because the size of our growing global community it continues to be part of our growth story. We plan to provide periodic milestone updates just as we did in December, when we crossed the 1 million subscriber milestone. We also plan to provide an update at the end of our fiscal year. In closing the fourth quarter was a great way to wrap up tremendous year for Salesforce.com. I cannot imagine a better time to join the company. We built a very solid foundation for the future and I look forward to describing our progress towards $1 billion of revenue in the courses ahead. This concludes our prepared remarks. So, let me turn the call back to the operator so that she can open things up for your questions.

(Operators Instructions) Your first question comes from the line of Kash Rangan from Merrill Lynch. Kash Rangan - Merrill Lynch: Hi, thank you very much. Looking at the bookings growth rate, it certainly looks like we've not hit this kind of growth rate of 70%, 71%, in almost two years now. And I'm curious if Steve or anybody on the call can give us some insight into what drove that? Are we seeing a bigger percentage of your new contracts for longer contract lynch or are we seeing any large deal activity that just happened to fall into the bookings number; that might explain why that number came in well above anybody's expectation?

Well Kash, we had a great quarter and that you can see in our GAAP results, which is what we're talking about in the call; we're not putting color around bookings. We never have and we don't ever plan to. It was an astonishing quarter by every measure and every metric that we have to manage our business in the fourth quarter was green fourth quarter. So, we're really excited. Kash Rangan - Merrill Lynch: So, it may be Marc, then I understand that you don't want to get into the details of what drove that; perhaps you could talk about how you are planning sales capacity for the forthcoming year and the pipeline management. How will the learning curve for the new sales reps be productive? I thought maybe you could talk about that, it could help us get some comfort behind the assumptions for fiscal '09? Thanks.

Well, Kash, as you know, we don't release information on our distribution capacity or the size of our sales organization. We never had and again we don't plan to what I can tell you however, is that we're just having a tremendous success in the market. You are familiar with many of our large wins that we've been able to take on the largest software companies in the world and beat them. And primarily our ability to execute whether it's in distribution and marketing or through the technology is spectacular and now we're off to a fast start for our fiscal year. Kash Rangan - Merrill Lynch: Great. Then I should not even ask you about the Microsoft competition, I said we'll just save down on the call. Thanks a lot.

Thanks Kash.

Thank you, Kash.

Your next question comes from Laura Lederman from William Blair. Laura Lederman - William Blair: Yeah. Thanks for a great quarter everybody. Just a few quick questions. One is its sort of strange to ask this question, given how great your numbers were. But are you seeing any economic weakness in any vertical market at all. Separately, can you talk a little bit about the datacenter that's going up in Asia; when that’s expected to be up and running and where you're putting that? Separately, are you seeing a business by design at all or has Microsoft hosted products in any sales cycle? Thanks. Three questions to both.

Okay.

Thanks, Laura.

Steve.

First of all, in terms of the economy or in a specific vertical market or sector, we had a great quarter and I think our results speak for themselves here. In regards to future datacenter implementations, especially in Asia, we've not yet made any specific announcements regarding when or where we'll have additional datacenters implemented. But we're evaluating how we grow our business internationally and the requirements to have datacenters in different markets and we hope to have some very exciting announcements in the near future. And finally, in regards to SAP and business by design, I've not personally seen them in any competitive situations and I hope that one day we will be looking forward to the whole market and the whole industry being on-demand and everybody claim to the terms that we've set. But as of right now, we see very little on-demand from the traditional software companies, as I'm sure you know.

Your next question comes from the line of Brent Thill from Citigroup. Brent Thill - Citigroup: Thanks. Marc, with some maturing of the AppExchange, can you just give us a sense of how you're seeing initial customers signing up; are they willing to sign up for more, are they taking more components of the exchange and thus helping with the stickiness of the overall platform, can you just give us a sense of what's happening there?

Well as you know, the AppExchange Ecosystem grew to include more than 800 applications and this quarter it really established itself as the foremost marketplace for on-demand applications. Our development in community now includes more than 700 partners and if you see, community also has made some major investments, which I'm sure you know is an AppExchange partner. In addition to ISPs, who are on the AppExchange, we of course also have a lot of ISPs now who are developing, who are not necessarily on the AppExchange; if you attended our Tour De Force event, you saw some of that happening. And of course, our customers are really making substantial gains with using Force.com applications inside their own companies and I believe there are now over 63,000 custom Force.com applications inside our customer base. So, we're very excited with how the AppExchange is going as well as the overall Force.com initiative. Brent Thill - Citigroup: Steve, just a follow-up. I think I missed the Kash's question on the contract length. Can you just refresh as where you stand today?

We haven't really talked about contract length surprised to say it. There is, we've seen no noticeable changes in our core metrics like a third of third of third that are less than 1% attrition. This model, you know, as it gets bigger gets more stable. I think you just need to consider that.

Yeah, and I'd just put some color around that and say that fundamentally, whether it's in contract length or the other metrics that Steve mentioned, we've not seen any material changes.

Your next question comes from Brendan Barnicle from Pacific Crest Securities. Brendan Barnicle - Pacific Crest Securities: Thank you. Two quick ones. First, Marc when you think about your businesses specifically, I think about on-demand more generally is that a business model that less resist or comes in a less pressure in a recession that's are traditional software models? And then second, as Force.com continues to take more shares, who is the biggest negative impact? I mean, who's the biggest loser from that change? Thanks.

Well, I think that first and foremost on-demand is the right time for on-demand whether it's economic conditions or business conditions or technology conditions. Anyway you slice it, it's a perfect storm for the software companies and it's a great opportunity for Salesforce.com to continue to execute well. And as we continue to rollout Force.com, we see the individual company that we'll be taking share from really the traditional application development and deployment companies whether it's Microsoft or even the traditional application severs companies like BA. We're really seeing interest from their traditional customer bases and looking at Force.com to build and deploy applications. Brendan Barnicle - Pacific Crest Securities: Great. And than Steve, other income was a little bit higher than what you've had the couple of quarters. Should we model that type of a level going forward?

Well, we keep increasing our cash balances so it's going to grow with that obviously. Although interest rates are changing, so you need to consider that as well. But as you know we don't give any guidance to those numbers. Brendan Barnicle - Pacific Crest Securities: Great, thanks guys.

Thanks, Bren.

Your next question comes from the line of Nathan Schneiderman from Roth Capital Partners. Nathan Schneiderman - Roth Capital Partners: Hi. Thanks very much. Hi Mark, Steve. I've a few questions for you. One is, I was hoping you could discuss the renewal experience in a little more detail. I was curious when your customers are renewing their contracts, are they tending to buy a lot more than their initial contract or keeping those renewals fairly stable; anything you can say about that?

Well I don't know how much, I don't really know how much I can say because I don't know how much information I have here specifically. But what I can tell you is that typically, when a customer comes around for renewal at that point, our job at Salesforce is to make sure that renewal is kind of data complete; that is, that we've worked harder over the contract period to make sure that the customer’s successfully implemented, to make sure that customer also has a high total login percentage, that adoption has occurred inside the customer. And then, when we come into the renewal period, it's mostly an automatic process. And I think Gram wants to add some additional color there as well.

I think as we look the business this year, versus last year we're definitely seeing more revenue, high revenues per customer. So, I think renewals are hanging, we just closed the attrition rate, which is unchanged it's very healthy, but also we're seeing add-on applications new subscribers and so on. So, revenue per customer is definitely increasing. Nathan Schneiderman - Roth Capital Partners: That's right. Graham, when you laid out the expectation of a 300 basis points operating margin improvement, when you think about the longer-term financial model, are you thinking this is about the right level, as we go forward or do you think you see accelerating improvement in margin? And then finally for Marc, there have been some rumors out there that you're getting bored, I was wondering and I wonder if you care to comment.

Well, as you know I founded Salesforce about nine years ago and since then we've now grown to over an $850 million annual revenue run rate and this year we plan to exceed a $1 billion and revenue we've also declined the entire software to service industry and created the ecosystem that we think is the future of software itself. So, I can tell you that it's anything but boring, but I appreciate the question.

Your next question comes from Richard Baldry from Canaccord Adams. Richard Baldry - Canaccord Adams: Thanks. Could you talk about the partner ecosystem, maybe in terms of whether you see them bringing more new customers to you or whether they are really cross selling into existing customers of Salesforce; get deeper into those questions and maybe also frame that, in terms of your own newer product offerings, but the content offering and/or the ideas. Thanks.

Well, we work hard, as you know, to move beyond just a Salesforce automation provider to have a whole range of applications. And today, we offer sales applications, marketing applications, call center applications, partner relationship management, mobile applications, content management and also our idea management technology. And I am sure that you've been on place, on the scene, on the public internet at ideastorm.com and on top of that, we now have a complete platform for delivery of your own software service applications, whether you are on ISP or a customer that's our global trusted secured infrastructure, our database as a service, our integration business service, our logic service, our users interfaces services and our application exchange. So the combination of both the application family that I walk through and the platform family really has taken salesforce.com to become a multi-application multi-category company and that's very much where our focus is and this year, we think we will continue to be an extension and expansion of that course strategy.

Your next question comes from the line of Philip Rueppel from Wachovia Securities. Philip Rueppel - Wachovia Securities: Yes. Thank you very much. As you broaden the product line that the average revenue for subscriber or the calculation at least we could do becomes less meaningful and certainly as you and can be giving us subs going forwards. If it’s going to be difficult to calculate could you give us some color on the pricing environment out there, whether it's on an apples-to-apples basis, whether there is competitive pressure or anything. Is pricing remaining stable, or are you seeing any changes there?

Well, from our perspective the pricing environment that has been mostly stable. We've created our own pricing environment, honestly, and we control that pricing environment through a tiered product strategy. I walk through the products, but then we also cheer those products up from our group edition capabilities, to our professional edition, to our enterprise edition, to our unlimited edition products and we are really the only on-demand provider that provides this kind of ability for a customer to start small and grow up over time. And we have also recently added our platform addition and also prolonging pricing for the platform. So, this really gives us the ability to control the pricing environment for the customer. Every customer needs a price that's appropriate for them, which is why through our direct sales organization were able to directly negotiate and create the price for that customer and we’ve been very satisfied with our ability to do that. Philip Rueppel - Wachovia Securities: Great and Steve, you'd mentioned that the attrition rate, the churn rate has remain very stable. Are there other spheres out there, that if the US does slow significantly that the churn rate in areas that are more economically hurt would increase, have you seen it?

Well, through the end of Q4, our metrics have been pretty much rock solid and we had a great Q4 that was; keep in mind November, December, January. So, our customers, I think as Marc said, we're entering to near on-demand is really important and taking hold regardless of the economic circumstances here. It's a technology shift and you don't want to be left behind during that shift.

Your next question comes from the line of Derrick Wood from Pacific Growth Equities. Derrick Wood - Pacific Growth Equities: Hi, thank you. Deferred revenue was up really big, it was $128 million sequentially and that was basically double the dollar increase from a year ago and yet your employee counts have only risen 25%. So there is clearly a trend going on here with new business you had signed in the quarter. I mean, can we infer that the deals are clearly getting bigger or that their productivity is going up significantly? And then, if you could comment on any, maybe, large deals that might have closed in the quarter that might have contributed to that spike? Thanks.

Well, really it's none of those things. We've made investments over the last nine years substantially in our technology, in our data center infrastructure, as well as in our ability to distribute our product on a global basis. And, of course, we've talked about that now on every conference call since we've been public the substantial investments that we've been making to build our company and to create a foundation for our future, and on this call we've also talked about additional investments that we're going to be making. And really when you look at the fourth quarter, we're reaping the harvest of a lot of investments that we've made in the past. So it's just very exciting for us to be able to deliver these numbers to our shareholders because this is what we've been focused on. And whether it's our application strategy and software service, or platform strategy with platform as a service, both of them are at the right place at the right time for this type of technology. And we're really worldwide marketed technology leader in the most important change in the software industry. So we think that that's what you're seeing today.

Your next question comes from the line of Peter Goldmacher from Cowen & Co. Peter Goldmacher - Cowen & Co: Steve, I wanted to follow-up on the comment you made that you said that you didn't see any material change in any business metrics, because as I go through your financials, I noticed for the first time, you've got a long-term portion of deferred revenue. So that implies that your invoice duration is getting a little bit longer, which means you should be able to collect more cash upfront, which certainly seems like that is the case when you look at the really solid numbers this quarter. Can you give us a little more information around what kind of contract you're able to get terms for over a year? And any sort of incremental color on that will be very helpful. Thanks.

Well, Peter, as you know, the small business both usually take one-year contracts with quarterly billing and the larger corporate take multi-year agreements with typically annual billings they breakout some of the deferred long-term or just because they are getting larger as a portion. So, there is nothing really fundamental change in our business. We've had rock solid business in the large corporate that Marc went through on the scripts as well, we don't talked about our smaller medium business. But it remains at third to third to third. The fundamental metrics of this market and this company are really solid. We had attrition remain, as we've had in the past year to a couple of years, at actually below a percent of our net subscribers based on a monthly basis. So, we feel pretty good about all of those numbers and I don't see any fundamental changes there. Just people realizing on demands as where they need to be.

And I would just to add that and I think what Steve has said and I think that if you talk to anyone here at the table. We have not made any material changes to our business model now for quite sometime. And the numbers you're seeing are really all about our ability to execute. And that's what's really going on. We're just able to deliver this execution to those facts. I will just point you to the GAAP numbers, which we think speak most clearly to the direct financial performance of the company.

Thanks, Peter.

I want to thank everybody for joining us today and that concludes our call. I want to remind everybody that tomorrow, Marc Benioff will be appearing at the Pacific Crest On-Demand Conference here in San Francisco; we’ll be giving at 12 noon Keynote and I encourage those of you who are local to try to attend. We'll also be having a webcast of that event on our website against salesforce.com/investors. Thank you very much for joining us today and have a good day.

Ladies and gentlemen, this concludes today's conference. You may disconnect at this time.