David Havlek - Investor Relations Marc Benioff - Chairman of the Board, Chief Executive Officer Graham V. Smith - Chief Financial Officer, Executive Vice President

Kash Rangan - Merrill Lynch Laura Lederman - William Blair & Company, LLC Brent Thill - Citigroup Tom Roderick - Thomas Weisel Partners Tom Ernst - Deutsche Bank Securities Michael Huang - ThinkPanmure Philip Rueppel - Wachovia Capital Markets, LLC Rich Baldry - Canaccord Adams Brendan Barnicle - Pacific Crest Securities Karl Keirstad - Kaufman Brothers Keith Weiss - J. P. Morgan Bradley Whitt - American Technology Research Nathan Schneiderman - Roth Capital Partners LLC

Good afternoon, ladies and gentlemen. My name is [Gerald] and I will be your conference operator. At this time, I would like to welcome everyone to the Salesforce.com Q3 '09 financial results call. (Operator Instructions) I would now like to turn the conference over to David Havlek, Vice President of Investor Relations. Sir, you may begin.

Thanks, Gerald, and good afternoon, everyone. Earlier today, Salesforce.com released the results for its third quarter fiscal year 2009. The full disclosure of these results can be found in our Q3 results press release as well as in our Form 8K filed with the SEC. Additional financial information, including historical financial details beyond what is provided in the press release, can also be found on our company website. Joining me today, as always, to discuss our third quarter is Chairman and Chief Executive Officer Marc Benioff as well as Chief Financial Officer Graham Smith. Marc and Graham will offer some brief prepared remarks and then we'll open things up to your questions. Because of the typically high volume of question requests and because we want to address as many of you as possible, we ask that you limit your questions to a single question today. Before we begin, let me inform you that the primary purpose of today's call is to provide you with information regarding our third quarter fiscal year 2009 performance. Some of our discussion and responses to your questions may 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 to be 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 on our most recent Form 10-K, particularly under the heading Risk Factors. I also want to remind you that today's call is being live webcast. A dial-in replay will be available shortly following the conclusion of the call until December 5, and a webcast replay will be available on our Investor website for approximately 90 days. To access the press release, the additional financial detail, the webcast replay or any of our SEC disclosures, I encourage you to visit our Investor Relations website at Salesforce.com/Investor. If you need further assistance, please contact me directly or send a message to Investor@Salesforce.com. Lastly before I turn things over to Marc, please be reminded that any unreleased services or features referenced in today's discussion or other public statements are not currently available and may not be delivered on time or at all. Customers who purchase our services should make the purchase decision based upon features that are currently available. With that, let me turn the call over to Marc to tell you about our Q3 performance.

Thanks, David. On today's call I'd like to accomplish two goals - review our solid financial results for the third quarter and discuss how we are managing Salesforce.com in the current economy. We believe that as customers are asked to do more with less in this uncertain environment, cloud computing will be an increasingly compelling alternative to traditional enterprise server software. In the next few minutes, we'll detail our near, medium and long-term strategies, but first let's go over our third quarter financial results, which speak to the core strength of Salesforce.com. Third quarter revenue rose by 43% from a year ago to $276 million. At this level, our annual revenue run rate now exceeds $1.1 billion, a first ever milestone for any enterprise cloud computing company. And, in the first nine months of this fiscal year, our revenue of $787 million already exceeds the $749 million in revenue we did all of last year. Salesforce.com is the fastest-growing enterprise software company of its size in the world today. That's pretty incredible in today's environment. Our strong revenue performance, combined with solid expense management, helped drive GAAP earnings per share of $0.08 up 60% from $0.05 per share a year ago, and we achieved these results while absorbing roughly $0.02 of dilution related to our previously announced acquisition of Paris-based InStranet. Operating cash flow was $17 million in the third quarter and now totals roughly $154 million through three quarters, which translates into roughly $1.23 per share of operating cash. And Graham will provide more details on the financials in a moment. Let me now discuss what we're seeing in the current environment and why we believe Salesforce.com can continue to take market share. As we look at our own fundamentals, we believe that we have the right model for times like these. The key elements of this model include: A core value proposition that emphasizes low upfront cost, low risk, and fast results; Customers on long-term contracts generating predictable recurring revenue; An attrition rate that continues to be less than 1% per month, which to date has not been materially impacted by the challenging business climate; A diverse and growing customer base of small, medium and large businesses spread across many industries, with a healthy percentage coming internationally, and a diverse base of small, medium and large transactions, regardless of customer size, that is not reliant on big end of quarter license deals; A growing Salesforce CRM applications product line that continues to expand beyond core Salesforce Automation; and An accompanying platform strategy that is leading the new platform as a service industry. We saw confirmation of our value proposition in our strong quarterly close, where our business strengthened through the quarter. September sales were larger than August, and October sales were larger than September. Equally as important, we delivered these results with no meaningful change to our pricing. There's no better proof of our continued momentum than the nearly 10,000 members of our community that gathered a few weeks ago for Dreamforce, our annual user and developer conference in San Francisco. There we met with many customers who are more ready than ever before to leave behind the cost and risk and complexity of traditional enterprise software. We believe that the current economic environment will continue to draw sharp contrasts between the traditional enterprise software model and our cloud computing model. The technology contraction earlier in this decade threw a spotlight on the value of cloud computing for many customers, and we believe that will be the case this time around as well. Ultimately, we feel this is a time for us to focus on selling our fundamental value proposition, growing market share, and hiring top talent that can help us realize the full potential of our technology. We saw further validation of this value proposition in our new customer wins and customer expansions during the quarter. Our continuing momentum was demonstrated by our 4,100 customer additions, equaling the high water mark set last quarter. We've added approximately 8,200 customers in the past six months alone, to bring our global community to roughly 51,800 customers. That's an increase of 36% in the past year and nearly twice what it was just two years ago. With 8,200 new customers in just six months, we're adding small and medium size businesses in the greatest numbers in our history. We continue to believe that the roughly equal distribution of our revenue from small, medium and large customers is a core strength of our business strategy. And because we have a diverse portfolio of transaction sizes - from very small to very large even at our largest customers, we're not tied to the large end of quarter deals that dominate traditional enterprise software companies. In the enterprise segment, we also delivered another outstanding quarter of customer success. That success is extending far beyond our core strength and Salesforce Automation. For the third quarter, non-Salesforce Automation services were approximately 25% of our new business signings. That's nearly double where it was just a year ago, a clear validation of our expansion strategy. Customers are extending their success with our growing portfolio of Salesforce CRM applications, including customer service and support, partner relationship management, content management, and ideas. And the Force.com platform, as the foundation of all these applications, is an increasingly successful development environment for customers and also ISVs that want to innovate without infrastructure cost and complexity using our proven cloud computing platform as a service. Let's take a look at some of the highlights. In our core Salesforce Automation product, Avia is replacing CVel to bring their total Salesforce deployment to more than 9,000 subscribers. This makes Avia one of more than 100 customers with more than 1,000 subscribers globally and one of the hundreds of CBOR placements that we have implemented. We also won significant Salesforce Automation opportunities at a long list of organizations, including Tyco, Sampo, Sony Europe, First Data, and the U.S. Census Bureau, just to name a few. While our award winning SFA continues to create outstanding results, some of the most exciting customer news this quarter was delivered by our non-Salesforce Automation products. Our Salesforce CRM customer service and support product posted its strongest quarter ever in Q3, with more than 600 new customers, including Sun Life, Pitney Bowes, Seagate, and Extra Space Storage. The investments we've been making in this product the past couple of years are really starting to pay off. Our acquisition of knowledge management leader InStranet, which we discussed on our last call, is a clear signal to our customers that we intend to deliver the best call center and customer portal solutions in the industry. The strength of this technology is reflected in its use for thousands of agents at market leaders like Comcast, Orange and Wachovia. Our Force.com platform also had an outstanding third quarter, accounting directly for more than 5% of total new business and remains our leading differentiator for Salesforce CRM. Just one quarter after Dell selected the Force.com platform as part of an enterprise license agreement that made them our largest global customer, I'm pleased to announce that Japan Post has extended their deployment by another 5,000 subscribers, to push their total deployment to roughly 65,000. Japan Post continues to be our largest Force.com platform deployment in the world. In all, we added nearly 200 new platform customers in the third quarter, including Logitech, Barr Pharmaceuticals, Novartis, and Lifetime Fitness, to name a few. In Salesforce CRM partner relationship management, we added more than 100 new customers in the quarter and did significant transactions at a long list of customers, including Motorola, Vodafone, Electrolux, and Riverbed. We've also seen exciting early traction with our related Salesforce to Salesforce offering, which we believe has the potential to drive adoption and network effects among our 52,000 customers. Already, we have hundreds of customers connecting to each other, including Motorola, Delta, Air France, Check Point, and DoubleClick, and many of these are inviting their partners to join their networks as well. What a great example this is of our multi-tenant architecture. And finally, our content management service is also gaining momentum. In addition to their SFA deployment expansion I just mentioned, Avia has selected our content management service for more than 3,000 subscribers. They join a long list of more than 100 new content management customers this quarter that includes NBC Universal, Ingram Micro and Verisign. In the intermediate term, we believe that our business model, value proposition, and market momentum position us well in these uncertain economic times. We're investing in key assets to take advantage of these strengths, which give us confidence in our growth plans for fiscal 2010. Through the first three quarters of this year, we've added more than 700 new employees, increasing our headcount in critical areas like global sales capacity and research and development. This is nearly double the 400 we added last year for the same period, and we feel these additions position us well for future growth. Looking to next year, we now estimate that revenue in fiscal 2010 will be between $1.350 billion and $1.360 billion, roughly 27% growth over fiscal 2009. I'd like to close by spending some time on the longer-term opportunity for Salesforce.com. As I mentioned earlier, customers are indeed asking more questions about how they acquire and manage new technologies, and many are being asked to do more with less. Our answer is your success, our cloud. Our Salesforce CRM applications let you manage and share any kind of data in the cloud, and our Force.com platform lets you build any kind of application. This simple idea - manage, share and build in the cloud at far lower cost, lower risk, and less complexity than traditional enterprise software - is the essence of our corporate strategy. While we continue to be the undisputed market and technology leader in CRM software and service, innovation in our core Salesforce CRM applications continues to be a top priority. Since December 2007, we have unveiled four seasonal additions, comprising more than 200 new features, including 120 suggested by customers on the Idea Exchange. That innovation has been recognized by Gartner, which named us as a leader in their Sales Force Automation Magic Quadrant earlier this year. And customers who use our applications are being recognized for their innovation, too. Just two weeks ago Forrester gave a coveted Groundswell Award to Starbucks for MyStarbucks idea based on our Salesforce.com Ideas. You can check it out at Starbucks.com. It's also why we are continuing to invest in our customer service and support products. Gartner recently named Salesforce.com a Visionary in its 2008 Magic Quadrant for Customer Service Contact Centers and Call Centers. We believe that service and support has the potential to rival Salesforce Automation in size. On the platform side, traditional software is suffering from comparisons to Force.com. In fact, in an independent study by [Galara] found that Force.com is 30% to 40% cheaper to develop on that Java, with a five times gain in productivity. That's why Gartner named the Force.com platform a Visionary in its Enterprise Application Server Magic Quadrant, a first for any platform as a service company. And ISVs are increasingly choosing Force.com as their platform standard. At Dreamforce we announced that some 50 ISVs are currently building natively on Force.com. Our customers love to run apps from native ISVs because they're backed by the same trusted, flexible, secure and reliable architecture that powers Salesforce CRM. That means that they can run more of their core enterprise functions, like ERP and accounting, in our cloud as well. ISVs like Thompson Reuters, Coda and Fujitsu can rely on the world's leading enterprise cloud for native development at unprecedented speed and built-in reliability and scalability. For ISVs, we believe there's no faster path to success in cloud computing than building natively on Force.com. For those of you in the financial community who weren't able to attend Dreamforce, please join us in New York City on December 8 for Cloudforce, our next set of announcements in this area. I'm sure you'll be extremely impressed with what we're going to show. So to wrap up, a few observations. The current environment is demanding two seemingly contradictory things of every business today - spend more efficiently on technology, but invest more in the success of your customers before someone else does. With the traditional enterprise software model, it's impossible to do both. The high startup costs and unacceptable risks make big software investments look foolhardy in this environment. That's why we've seen traditional enterprise software customers struggle, and that is why we intend to vigorously pursue the opportunity that this moment presents. That’s exactly what I've been telling our sales teams and all of our customer-facing employees. We have always been about low startup costs, low risk, and fast results. That's simply who we are. In a telling sign of the times, one of our competitors just announced zero percent financing for its software mega purchases. Nothing draws attention to the fundamental flaw of traditional enterprise software more than a promotion usually deployed by auto makers to move last year's model off the lot. Now let's go to Graham, with a detailed look at our financials. Graham V. Smith: Thanks, Marc. Good afternoon, everybody. As Marc said, Q3 was another solid quarter for Salesforce.com. We exceeded our goals on both revenue and EPS. Marc's given you an early view of our expected growth in fiscal 2010 and described why we believe our value proposition and business model provide a great foundation for continuing to win market share. While we are pleased to report strong results and to forecast continued growth, we are mindful of the current economic environment and will obviously remain vigilant that any signs the pervasive uncertainty is affecting demand for our products. As Marc noted, company revenue rose by roughly 43% year-over-year to $276 million, and in constant currency terms, revenue grew 42%. International revenue was roughly 28% of total revenue. That's up from 27% a year ago. In Europe, revenue of $48 million was up 42% in dollars and up 39% in constant currency from a year ago. Asia, with revenue of $28 million, continued to be our fastest-growing region, with revenue up 64% in dollars and up 55% in local currency. We're continuing to make investments in our international sales capacity as well as working to complete our new data center in Singapore by the end of this year, as we believe we are only scratching the surface of the international market opportunity. Our growth strategy is two-pronged - acquire new customers as rapidly as possible and then grow our business within those accounts. We executed well against both prongs in Q3, first by adding 4,100 new customers, and second, by garnering strong add-on and upgrade business from our installed base, which comprised roughly half of the total value of new business booked. That's much in line with prior quarters. Third quarter attrition rates continue to be at our historical run rate of less than 1% of net paying subscribers per month, which also contributed to our solid revenue performance. Gross margin for the third quarter was roughly 80%. That's up 3 points from 77% a year ago and up slightly from Q2. The biggest driver of the year-over-year improvement continues to be better margins in our professional services business. The three-point improvement in gross margin for Q3 translated directly into a year-over-year operating margin improvement of three points, increasing our GAAP operating margin to 6%. Year-to-date, our operating margin is also 6% - 4 points higher than the prior year. Despite the financial impact of integrating InStranet in Q3, we're still on track to achieve our 3point operating margin improvement goal for the full year. Share-based compensation for the quarter was approximately $19 million and, excluding those expenses, our operating margin was approximately 13%. We finished the third quarter with just over 3,300 full-time employees. That's up more than 270 from last quarter. This increase included approximately 40 employees who joined us from InStranet. Before I discuss any specific details on the balance sheet, I think it's very important to discuss the trend we've seen of an increasing proportion of our invoicing taking place in the fourth quarter of each year and the ramifications of this trend. We have traditionally signed more new business in the fourth quarter than any other quarter. The reasons for this seasonality include customer buying patterns, particularly in the enterprise segment, our own field sales compensation plans, and not least, Dreamforce, which generated a significant pipeline in Q4. Not only do we sign more business in the fourth quarter, but this business is also disproportionately weighted towards an annual billing cycle versus the other third quarters. To give you a sense of the magnitude, in the first, second and third quarters, the dollar value of annual invoices typically outnumber monthly, quarterly and semi-annual invoices by a factor of approximately 2 to 1. In the fourth quarter, the annual billings jump to outweigh invoices with other terms by more than 3 to 1. The year-on-year compounding effect of the business seasonality and invoice terms causes the value of invoicing in Q4 to be much larger than the other quarters. This invoicing spike in Q4 has an obvious impact on Q4 deferred revenue and will almost certainly make Q1 our largest cash collections quarter in each year. We believe that this trend of a big deferred revenue balance in Q4, followed by a sequentially down Q1 followed by a relatively flat Q2 and Q3, will continue into next year. Please bear this trend in mind as I go through highlights of the balance sheet and cash flow. As of October 31, cash, cash equivalents and marketable securities on the balance sheet were $805 million. This figure was approximately $19 million lower than Q2, due primarily to the $27 million net that we spent on the acquisition of InStranet and also to the $17 million we spent on the purchase of shares in our Japanese [KK] subsidiary from some of the minority investors. Our ownership position in the KK is now over 70%, which gives us a supermajority. Our Q3 ending cash position is roughly $230 million more than a year ago. Accounts receivable rose by roughly $11 million sequentially to $158 million. But at 52 days, our DSO actually declined 7 days from a year ago. We've done a good job of managing collections and our receivables aging looks healthy. During the Q3 we didn't see any significant change in our customers' willingness to pay for our services, nor did we see any material change in our mix of quarterly and annual invoices in comparison with previous Q3s. Other net assets rose by roughly $30 million during the quarter, primarily as a result of the purchased intangibles relating to InStranet and the Japanese KK stock purchase. Deferred revenue finished the quarter at $470 million. That's down $10 million from Q2. Included in this net change of $10 million was a reduction of almost $15 million caused by the U.S. dollars' remarkable rise against the euro during the quarter. That was offset by a small gain of roughly $1 million on the yen. Just to be clear, in constant currency terms, deferred revenue rose by $4 million from Q2. On a year-over-year basis, deferred revenue rose by $129 million or roughly 38%. Given the seasonal pattern of invoicing I discussed earlier, we believe that year-over-year comparisons are more meaningful. Off balance sheet backlog was more or less flat quarter to quarter, although it was also impacted by a stronger dollar. Third quarter operating cash flow was $17 million. This downward trend that we have seen since Q1 is primarily a result of the structural shift in our invoicing seasonality that I discussed earlier. Q1 collections were significant higher than Q2 and Q3. On the other hand, our cash expenses grew steadily through the year, resulting in declining operating cash flow. We expect Q4 collections to increase significant from Q2 and Q3 as we start to collect some of the early Q4 invoices within the quarter. However, we don't believe that we'll achieve the same level of operating cash flow that we saw in Q1 until the first quarter of next year, when we expect to be collecting most of the Q4 invoicing spike. We're optimizing our business to grow market share and continue to invest in adding sales capacity for as long as our margin improvement goals allow. In addition to the invoicing seasonality issue, three other factors contributed to the decline in operating cash flow: First, the strengthening dollar had an overall negative impact on operating cash flow of approximately $9 million during the quarter. Second, prepaid expenses rose significantly in Q3. This use of cash was primarily the result of prepayments to certain vendors for Dreamforce, which was held early in Q4. And finally, in Q3 there was a one-time negative impact to operating cash flow on the excess tax deductions reclassification line of approximately $4 million related to finalizing our fiscal 2008 tax return in September. Let me close my comments today with our outlook. As we look ahead to Q4, a strong business pipeline gives us confidence that, as in past years, Q4 will be our largest new business quarter of the year. However, the dollar's rapid strengthening against the euro, which impacted our Q3 result, is expected to reduce revenue in Q4 by around $7 million. With that context, we expect fourth quarter revenue in the range of approximately $284 million to $285 million. GAAP earnings per share for the fourth quarter is projected to be in the range of $0.06 to $0.07. Remember, we had our Dreamforce event, which I talked about on the last call, that was a net total cost of about $0.01 per share. This projection includes roughly $22 million in share-based compensation and $4 million of purchased intangibles. In addition, we expect our GAAP tax rate to remain at roughly 48% in Q4 and have approximately 127 million fully diluted shares outstanding. Adding Q4 revenue guidance to our year-to-date revenue of $787 million equates to a full year revenue outlook of $1.071 billion to $1.072 billion, within the range that we guided last quarter. Full year EPS is expected to be in the range of $0.30 to $0.31. That's a penny higher than our guidance from the last quarter. For the full year, the average fully diluted share count is expected to be roughly 126 million shares. Turning to fiscal 2010, we continue to focus on growth and winning market share. We believe this economic environment presents an opportunity to accelerate the shift to cloud computing. With little required upfront investment, a strong record of customer success, and rapid implementations, we are able to offer customers impressive time to value. While we're managing hiring and expenses very carefully, we will continue to make important investments in sales capacity and product development in the quarters to come. We are fortunate that our recurring revenue model provides some extra visibility in a time of uncertainty. As Marc mentioned earlier, we currently project revenue for fiscal 2010 in the range of $1.350 billion to $1.360 billion. That's up approximately 27% over our fiscal 2009 estimate. We look forward to discussing our fourth quarter results and more details of our fiscal 2010 business plan on our next call in February. With that, let me open up the call for your questions.

(Operator Instructions)

Just quickly before we take our first question and while the operator is queuing our calls, I'd like to highlight a couple of upcoming events that may be of interest to the investment community. First, Marc will be keynoting at the Credit Suisse Technology Conference in Phoenix, Arizona. His presentation is scheduled for 4:15 Mountain Time on Wednesday, December 3. If you're unable to attend, we will have a webcast and a replay available on our website. Second, as Marc noted in his prepared comments, on Monday, December 8, Salesforce will be hosting its next exciting customer event, Cloudforce, in New York City. I encourage all of you to attend, especially those of you who were unable to attend Dreamforce in San Francisco earlier this month. There's really no better way to understand our business or the enthusiasm of our community than to attend one of our customer and partner events. Seating is limited, so please contact the IR team and reserve your space today. With that, let's go ahead and take our first question.

Your first question comes from Kash Rangan - Merrill Lynch. Kash Rangan - Merrill Lynch: Graham, just a clarification and a question for you. Adjusting for the one-time items in Q3 that impacted the cash flow from operations, we come up with the cash flow as a percentage of revenue for the first nine months of the fiscal year about 20% - 21%. Should we think roughly of cash flow from operations being in that ballpark for the rest of the - not so much the fourth quarter, but the blended fiscal '09 numbers? Because that's been the trend and I'm just looking - you implied there's some sort of a cash flow rebound in Q4. Are we still targeting that 20/20 [inaudible] revenue conversion into cash flow for this year? And also, when you look at next year, obviously a lot of uncertainties in the economy. How do you think it plays out with collection cycles? Are we still going to be able to invoice and collect from the small businesses for the same six months and the medium businesses for the 12 months and the large enterprises between one to two years? In other words, how do you think the potential credit crisis could impact payment terms and therefore cash flows for the company next fiscal year? Graham V. Smith: Well, as you know, we don't give guidance on cash flow, either a quarter out or for next year. I just did say in my prepared remarks that we expect to have more collections in Q4, but I'm certainly not going to make a forecast here on operating cash flow for Q4. I think we certainly are very focused on our customers' success. We feel we're doing a good job on collections. Clearly, there are a lot of variables at play, not just in the economy but next year there's certainly, you know, we'll have to figure out what our margin will be. There's all kinds of things that will go into the business plan next year. So I think we don't give guidance on cash flow. I think we have proven that this business model is a very healthy cash generation model and we've also just given guidance for some pretty healthy growth numbers for next year, so I think those should be hopefully some good positives to take away.

Your next question comes from Laura Lederman - William Blair & Company, LLC. Laura Lederman - William Blair & Company, LLC: Can you talk about the economic impact you're seeing on enterprise versus middle market versus small companies, any detectable weakness in vertical markets or by company size? And the same thing with churn. I know the whole churn has not changed, but what about in any given segment?

Well, in terms of economic impact, of course these are very uncertain times and we're extremely mindful and cautious of these times, but we have not seen any dramatic impact in terms of how customers are buying from us. We continue to see healthy growth in small, medium and large customer acquisition. You can see that in our 4,100 customer number, which, as you know, is tied with our record from last quarter. And I would also say that if there is any change that we're seeing it's customers, of course, they watch CNN and CNBC just like we all do, so they're more cautious in terms of making big, risky commitments. So they're going to be more mindful during their purchasing cycle. They're going to involve more people from their company. It kind of is a recollection back to a time when we started the company for us. We also were going through an economic crisis, not exactly like this one obviously, but what we found was that we were still doing lots of deals and these deals just grew over time, which is really our core strategy. So our sales and our relationships with our customers are extremely healthy and we're seeing that health across all three segments. Graham V. Smith: And just to add, Laura, I think just to repeat Marc's earlier comments, October was certainly the largest month in the quarter; that was a good sign for us. And I think in terms of your question on churn in the segments, I mean, clearly we've always said that we typically see more churn among the smaller customers in the SMB space, less churn in the enterprise space, but there was no appreciable difference or change through the end of Q3. So clearly we'll continue to watch that carefully, but didn't see anything through the end of October.

Your next question comes from Brent Thill - Citigroup. Brent Thill - Citigroup: Your fiscal 2010 guidance of 27% growth, I'm just curious in terms of - if you can articulate how much of that is already booked versus new business that needs to be added? Just give us a sense in terms of what type of visibility you already have on that number? And then I guess, Graham, just for Q3's guidance, 3% sequential growth, I think, is the low end of your guidance, and in our model you haven't done 3% sequential, I don't know how long back we'd have to go, but just in terms of what you're looking at for Q4, if you could walk through that as well.

Well, let me take the first question, then I'll have Graham handle the second one. In terms of the first question, one of the benefits of our model is that when we come into a quarter, the vast majority of the revenue of the quarter really has already been booked. And sales that happen in the quarter or bookings that happen in the quarter, a very, very low percentage show up really on the income statement or balance sheet in any serious way. So that does give us tremendous visibility going into any one quarter and, in terms of the fiscal year, it's true also on a relative basis, of course, because we are coming in with a tremendous amount of momentum into the fiscal year based on all of our customer contracts and agreements. And then what we do is we add onto those customer contracts and agreements bookings as they go during the year. But in terms of the amount of revenue that we can see for the year, the reality is the vast majority of that revenue is done before we start the year. I hope that answers the question. Is that a fair characterization, Graham? Graham V. Smith: Yes. So in terms of Q4 I think when we gave guidance last quarter, it was sort of tough to call what was going to happen in the FX markets and I think the change you've seen in the guidance is really just a reflection of the dramatic rise in the dollar that we saw during the quarter. Clearly, you know, we have to make other estimates in terms of the linearity of business in the quarter and all those kind of things, but I think we feel comfortable with the guidance we've given and I think FX is sort of the big sequential story here.

Your next question comes from Tom Roderick - Thomas Weisel Partners. Tom Roderick - Thomas Weisel Partners: So, Marc and Graham, I know you don't want to guide specifically on cash flows, but perhaps you could help us think about some parameters for deferred revenue for next quarter, just in light of the fact that last year there was such a big spike from Q3 to Q4 and you've talked about some of the seasonality trends. When we think about the deferred revenue growth on a year-on-year basis, should we think about it in the same ballpark as revenue growth or a different way you would encourage us to think about it? And then also should we expect - you had the landmark Dell deal, I think, in the second quarter should we expect that to begin hitting on a full basis here in Q4 into the balance sheet as well as the P&L?

Well, in regards to deferred revenue, it's hard for us to forecast exactly what's going to happen in deferred revenue, and I've said that before. Because, of course, bookings do not match billings and in the fourth quarter there can be a variety of billings that occur, not just deals that are done in the fourth quarter but also renewals as well as invoices that start in the fourth quarter based on other transactions that have done in the year. So as we've kind of received these questions on the calls or at conferences, we just continue to be cautious ourselves in kind of saying exactly what deferred is going to be on any one particular revenue quarter. Graham, would you like to add to that? Graham V. Smith: Yes. I think we've spoken before about the expectation that deferred will go up in Q4. Certainly, we would expect a significant increase in deferred in Q4. But we have, as Marc has said, for all the reasons - there are many moving parts - it would be, I think, unwise of us to try and start guiding on deferred. It's just a very difficult number to forecast for all the reasons we talked about before in terms of [stop] periods, and now we have foreign exchange in the mix as well. So I don't think we really want to try and forecast deferred and I go back to what we said earlier we are certainly focused around growing market share, adding sales capacity as far as our operating margin improvement goals will allow, and the cash is kind of what it is. I mean, that's sort of an outcome. We manage cash carefully, but there is this seasonality factor that I've talked about.

Your next question comes from Tom Ernst - Deutsche Bank Securities. Tom Ernst - Deutsche Bank Securities: Graham, to follow up on that last question, I think you did give us a new metric this quarter that I don't believe I've heard before. If I heard you right you said that in the fourth quarter your annual invoicing outnumbers or perhaps out dollars other invoicing by a 3 to 1 margin. So the simple math would suggest that if you grew deferred revenue by $134 million last year that roughly $100 million of that was annual invoicing. And I guess if that's correct, the follow up would be we would expect those annual invoice customers to be reinvoiced annually here in this coming Q4, and that's before you start with new bookings. Is that simple math right? Graham V. Smith: I don't want to get into trying to figure out the math of this on the call, Tom. Certainly, we're trying to give you more information so that you can build your model. And clearly in any year there is some level of customer attrition that we talk about, so you have to take that into account in terms of the renewals of what's going to be reinvoiced. So we're just really trying to give you more information to help you build your model. Tom Ernst - Deutsche Bank Securities: Fair enough, but you did, just to be clear, say on the call that your annual invoices were 3 to 1 versus all others in Q4. Graham V. Smith: We said in Q1 and Q2 and Q3, annual invoicing typically outweighs all the other terms by about 2 to 1, and in the fourth quarter the annual invoicing jumps to over 3 to 1, the other terms. Yes, that's what we said and that is new.

Your next question comes from Michael Huang - ThinkPanmure. Michael Huang - ThinkPanmure: So could you help update us on the early activity that you're seeing with InStranet? Are customers waiting for the application to be ported to the Salesforce platform before they commit to the offering and have you seen this open up some doors at higher [volume and BDC] organizations?

Well, I think the big success for InStranet so far is a clear message to the market and to our customers that we intend to be a serious player in the customer service, contact center and call center marketplace. Of course, they came to us with a number of very large customers and large implementations and marquee customers, and their specific focus is to rewrite that product onto our architecture, which is currently under way. And that's really where we are today. Of course, you saw that we had very good customer service traction in the third quarter and I would attribute a lot of that to the increased confidence that customers have in our total solution now that we are bringing InStranet. Certainly, the call center and customer service and content center marketplace, this is as big an opportunity as Salesforce Automation. We felt like we did have a feature gap in knowledge management that we needed to fill. We have now filled that. That technology is under way. We have a world class team. The head of InStranet, Alex Dayon, is now the Senior Vice President of our entire customer service products division, and he is doing a tremendous job leading us and giving us insights into this marketplace that we never had before. And his relationships and expertise really kind of have opened doors for us that previously were closed. So we're extremely excited about it, and we're looking forward to great success in this market going forward.

Your next question comes from Philip Rueppel - Wachovia Capital Markets, LLC. Philip Rueppel - Wachovia Capital Markets, LLC: Marc, you mentioned a number of additional big wins in Force.com. Could you talk about perhaps some early projects from any customers that have actually rolled into production? And you mentioned the 5% of bookings. Is that something that sort gets customers their first pilot programs up and running and increases as they roll their own projects into their own production or is it something that stays reasonably fixed for the foreseeable future?

Well, we're seeing a lot of exciting traction with Force.com as a discrete platform offering. That really started to increase in Dreamforce last year when we started to offer Force.com really as a separate product to customers and talk about it separately. That accelerated when we did our Tour de Force program across the world this year. And then you really saw a Dreamforce where we really took it to another level with the introduction of Force.com sites. That's now in developer preview, and that has really captured the imagination of so many customers around the world. And we see that as a huge catalyst for us in terms of customers understanding the power of Force.com for both internal enterprise applications as well as web applications. We're talking to customers who want to run their entire website now on the platform, their portals, their intranet, etc. So it's a very exciting opportunity for us. If you spend any time at Dreamforce at all, every single customer that I personally spoke to was ready to start working with and implementing some aspect of the system. As you know, we've had tremendous traction with our customers with Force.com. Customers have built about 85,000 applications. They also have written and installed millions of custom fields and custom objects. They've done so many things. In terms of specific customers besides the ones that I mentioned on the call, just because I was reading InfoWorld this morning, InfoWorld laid out their top 100 IT projects of the year and the top winner was New Jersey Transit, which is a Force.com implementation. You probably know they now manage all of their incidents using Force.com, so any problems with any of the trains or anything that happens involving their entire system. And they're going to be using Force.com sites to be making all that information publicly available on the web as well as on mobile devices. So we look forward to continuing to grow this opportunity. It's very complementary. As you know, it's not a discrete technology from our CRM offering; it's part of our CRM offering, it's part of the customer service offering, it's part of the content management offering, it's a tremendous differentiator. None of our competitors have built platform as a service. Most of them don't believe in it, which is very exciting to us, but customers do and we see them doing a tremendous amount of work using the platform.

Your next question comes from Rich Baldry - Canaccord Adams. Rich Baldry - Canaccord Adams: Given the fact that it looks like you believe that you can accelerate sort of market adoption in a weaker macro environment, could you maybe talk about the trade-offs in using cash to do something like a buyback given the share valuations, which could also simultaneously let you accelerate your spending and still hold your earnings in line, whether something of that strategy could be something to think about as you go into your heaviest cash generation quarters? Graham V. Smith: Certainly, I think we'll consider all of those things. Ultimately we have to discuss any ideas like that with the Board. I think right now with this kind of market, there's a lot of uncertainty around where prices are going to stabilize, but certainly that's something we'd consider going forward. But certainly no announcements there or anything like that.

Your next question comes from Brendan Barnicle - Pacific Crest Securities. Brendan Barnicle - Pacific Crest Securities: Graham, on last quarter's call you'd given us indication on growth of the off balance sheet and the combined sort of on balance sheet and off balance sheets and the total - the linked growth number on a several quarter basis. Do you have that number for us again this quarter? Graham V. Smith: Yes, that number I say was around 60%. I think last quarter - it was around 50% this quarter. A couple of things, number one, as you recall in the second quarter we added a couple of real big customers with very, very big multi-year agreements - Dell and VMware. That was the first thing. The second thing is that off balance sheet, the [inaudible] also is affected by revaluation through foreign exchange. So there's really sort of two things that drag on that, so it was up about 50%.

Your next question comes from Karl Keirstad - Kaufman Brothers. Karl Keirstad - Kaufman Brothers: You mentioned that the currency hit for the upcoming January quarter is about $7 million, if I heard you correctly, which would equate to about a 3% growth rate hit. Graham, as we look out into fiscal 2010, your 27% dollar-denominated guidance, should we assume that there will be something close to that 3% growth rate hit from currency? In other words, your constant currency growth is a little bit more like 30%? Graham V. Smith: No, I think it would actually be a little more than that as an average for the whole year, because if you remember, we had a tailwind in Q1 and Q2, and we'll be moving to a definite headwind throughout the year. I don't actually have that percentage handy for the full year next year.

Your next question comes from Keith Weiss - J. P. Morgan. Keith Weiss - J. P. Morgan: A very impressive quarter, especially in the environment - adding 4,100 new customers - and a real validation of you guys' value proposition. But economic realities are economic realities, so when you're giving FY '10 guidance and considering how big a customer base you have, to what degree are you guys factoring in stuff like unemployment rate? That looks like it's definitely going up; could reach as high as 10%. Small business bankruptcies are probably going to be on their way up as well. Could you talk to us about to what extent those factors are baked into the guidance that you just gave us?

Well, we're very cautious and mindful of this very uncertain economic environment and we have been for the entire year. And, of course, if you go back to our Q3 call last year and then kind of looking all the way to today, we continue to make those statements that we're watching what's going on in the environment, but we have not seen it materially impact the business. And specifically, as we've talked about a lot of our core areas, so whether it's things like attrition or pricing, work in small, medium and large customers, small, medium and large transactions, we continue to monitor all of these variables of our business, of course, but one of the nice things about this business is the diversity of the portfolio of customers, the diversity of portfolio of revenue, and the diversity of portfolio of transactions. So if customers are not able to do the mega transactions, it doesn't affect us the way it affects SAP and Oracle, as you saw in this quarter. If you look at any particular area, we've built a business that can be flexible and move with the market and move with the economy. Of course, we continue to be cautious and we continue to be mindful of the environment. You have to remember, we're not economists. That's not what we do. But we've looked at our business very deeply and this is our belief about, you know, what we will do this year, and we feel pretty good about knowing our business and it's capabilities. And so we've taken, we believe, an appropriate stance.

Your next question comes from Bradley Whitt - American Technology Research. Bradley Whitt - American Technology Research: I appreciate the metrics on your non-core SFA business - I think you said 25% of new business and also the Force.com metric, 5% of new business. Just curious as to how you expect this to trend over the next several quarters and whether you'll be providing those metrics going forward?

Well, we're excited about our ability to build new products and to enter new categories. Certainly, the way this company started was with its namesake Salesforce Automation product, which is, of course, an award-winning product. It's a well-regarded brand in its category, and Salesforce.com is the one to beat. I mean, everyone knows that we're number one in cloud computing when it comes to Salesforce automation. We've tried to extend that application category by entering customer service and support, call centers and contact centers, by making investments in that category. That's why we purchased InStranet. We've made significant investments in the content management area. That's why we made a previous acquisition there. We've also done other key investments and focuses to build a full family of applications for our customers, and then we complemented that by entering a new category, which is the platform. And when we entered that category, of course, for us, we really believe strongly that the traditional enterprise software platforms are going to suffer in this environment. Customers are not going to bring out their checkbooks for the cost and risk and complexity of big database purchases or application server purchases or data center purchases and so forth. Instead, cloud computing offers them this low risk, pay as you go, incremental approach that's a great opportunity in this market. It's a great technology, meeting this uncertain economy in the correct way. So we're able to offer this full range of offerings, and that’s really our core strategy. And customers understand it. If you were at Dreamforce, I'm sure you came away with the impression, as I did, that customers feel we're doing all the right things. Graham V. Smith: I was just going to add we obviously are not going to give any guidance about how we expect these percentages to trend over time. We're trying to give people a little more insight into the business and hopefully that will serve us well, but no, we're not trying to make any predictions about these percentages from one quarter to the next. I'm sure they'll move around over time. But we're very excited about the progress of making non-SFA products.

[Gerald], unfortunately we're coming short on time here, so we have time for one more question. I apologize to all of those of you that are still in queue. I see lots of you out there, so please feel free to call Investor Relations after the conclusion of the call. We'll take one more question.

Your last question comes from Nathan Schneiderman - Roth Capital Partners LLC. Nathan Schneiderman - Roth Capital Partners LLC: Why don't I throw out a two-part question, since I'm the last one? I was curious on the sequential decline in revenue from Europe - I don't think we've ever seen that - and what were the dynamics that drove that? Was there just weakness in Europe or something else? And then I was also hoping you could share with us the percent of your revenue mix from financial services and also the percent from high tech. Graham V. Smith: We've never given any specific percentages of our revenue from any particular vertical. I think Marc and I both talked about the fact that we think we have good diversification across verticals, but I don't think we want to start getting into that level of detail. In terms of EMEA, in terms of Europe, the overall growth there, it was certainly, you know, it was comparable to the overall growth rate of the company and that's just sort of a reflection. There's certainly some - it's sort of based around the prior new business, and I think it's just [inaudible] now. I'm not aware - Marc, you can fill in - I'm certainly not aware of any significant trends going on in Europe that we've seen in the last few months.

We saw good, healthy business activity in both small, medium and large accounts in Europe. Our major call center operations in Dublin, Ireland as well as our field sales teams throughout Continental Europe all performed very well during the quarter.

I want to thank everybody for joining us today. Again, if you have any follow up questions, contact Investor Relations, and we'll look forward to seeing you at an event soon. Thank you very much.

Ladies and gentlemen, this concludes the Salesforce.com Q3 '09 financial results conference call. You may now all disconnect.