John Cummings - Director of Investor Relations Marc Benioff - Chairman of the Board, Chief Executive Officer Graham Smith - Chief Financial Officer, Executive Vice President

Kash Rangan - Bank of America Merrill Lynch Brent Thill - UBS Karl Keirstead - BMO Capital Mark Murphy - Piper Jaffray Kirk Materne - Evercore Rick Sherlund - Nomura Terry Tillman - Raymond James Jobin Mathew - Deutsche Bank Nathan Schneiderman - Roth Capital Ross MacMillan - Jefferies Steven Ashley - Robert W. Baird David Hilal - FBR

Good afternoon. My name is Sharon. I will be your conference operator today. At this time, I would like to welcome everyone to the Salesforce.com fiscal second quarter conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions). Thank you. Mr. John Cummings, Director of Investor Relations you may begin your conference.

Thank you, Sharon, and good afternoon, everyone. Thank you for joining us today to discuss our fiscal second quarter 2014 results. Our second quarter results press release, SEC filings and a webcast replay of today's call can be found on our investor relations website at www.salesforce.com/investor. We will also be posting highlights of today's call on Twitter at the handle @salesforce_ir. With me today are Marc Benioff, Chief Executive Officer and Graham Smith, Chief Financial Officer. Marc and Graham will share a few prepared remarks about our second quarter results. Then we will open the call up for questions. Our commentary today will primarily be in non-GAAP terms. Reconciliations between our GAAP and non-GAAP results and forward guidance can be found in our earnings press release issued about an hour ago. During the call, we may offer incremental metrics to provide additional insight into our business or quarterly results. Please be advised, this detail maybe one-time in nature and may or may not be provided in future. It's also possible we may reference certain unreleased services or features not yet available, because we cannot guarantee future timing or availability of these services or features. We recommend customers listening today make their purchase decisions based on services and features currently available. The purpose of today's call is to provide you with information regarding our fiscal second quarter 2014 results. Some of our discussion and responses to your questions may contain forward-looking statements which 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 these risks, uncertainties and assumptions as well as other information on potential risk factors that could affect our financial results are included in our forms filed with the SEC, including our most recent report on Form 10-Q, particularly under the heading risk factors. With that, I'll turn the call over to Marc. Mark?

Thanks so much, John. I have really never been so excited about Salesforce.com and everything that's going on with the company and that's why I am so delighted to get on the call with everybody today. We are having an outstanding year of growth and I am absolutely delighted to share our second quarter results right now. Revenue for the second quarter rose 31% from a year ago to $957 million, In constant currency, revenue grew even faster at 32%. No other software company, there is no other enterprise software company of our size is growing faster. Deferred revenue rose by more than 30% year-over-year, finishing the quarter at nearly $1.8 billion. Just outstanding. Operating cash flow exceeded a $180 million for the quarter, an increase of more than 30% year-over-year, and the dollar value of booked business on and off the balance sheet now tops $5.6 billion, also up more than 30% year-over-year. Based on these fantastic results, I am thrilled to announce that just four years after delivering our first $1 billion year, we expect to breakthrough our first ever $1 billion quarter in the third quarter of fiscal 2014, our next quarter, an amazing milestone for Salesforce.com and for the entire cloud computing industry. In addition, we are once again raising our full fiscal year 2014 revenue guidance, the high end of our guidance puts us on pace to deliver fiscal year 2014 revenue of $4.025 billion with a full year growth rate of 32%, just spectacular growth. Salesforce has always been a catalyst and evangelist for innovation enterprise software. We pioneered the shift to the cloud, to social, to mobile and we have been recognized for innovation by Forbes Magazine, who just ranks Salesforce.com as the most innovative company in the world for a third year in a row. Congratulations to the entire team at Salesforce.com for this incredible achievement. Now, more than ever, companies are turning to Salesforce.com as their platform for innovation. With our social and mobile and cloud technologies, our customers are connected with their customers in entirely new ways and they are becoming customer companies. Customer companies have a deeper connection with their customers. They can market on any channels, sell as a team, service customers everywhere. And, with the next generation customer platform, customer companies can connect everything on the internet of things. With our four product lines, sales cloud, service cloud, marketing cloud and the Salesforce platform, our customers have the tools to become customers companies, unlock greater levels of growth, innovation and success. They can build faster. That's why our customers have made Salesforce.com, the world's number one CRM platform and then clear leader in each of our core four markets, our flagship Sales Cloud is now the number one app in the world for sales and it's helping customers drive phenomenal sales performance and top-line growth that's why Gartner once again named us as the undisputed leader in its Magic Quadrant for Sales Force Automation for the seventh year in a row. In addition to the incredible capabilities from Work.com and Data.com, the Sales Cloud now delivers a complete lead to close solution with Pardot fully integrated into the Sales Cloud giving our customers one of the leading apps in B2B marketing automation and a unique asset from our acquisition of ExactTarget, we couldn't be more thrilled with Pardot and how it brings a full range of marketing, campaign management and solutions deeply embedded into our Sales Cloud. The Service Cloud is now the world's number app for customer service and support and the only platform that ties customer service with sales and social and that's why Gartner declared Salesforce.com as the clear leader in both vision and execution in its most recent Magic Quadrant for Customer Service making us again the number one solution for customer service. And I am excited to announce that we doubled down on the Marketing Cloud this quarter with the acquisition of ExactTarget, the largest acquisition in our history. We believe that ExactTarget, Marketing Cloud will define the future of marketing. It is a powerful one-to-one customer platform that makes it possible for companies to bring in customer data from any source and deliver highly personalized digital marketing to any customer across any channel. With the combination of ExactTarget, Radian6, Buddy Media and social.com, we have the platform of choice for CMOs with powerful and are power house in marketing across email, social, web, and mobile. And the Salesforce platform is the world's number one platform for developing enterprise cloud apps and the only platform with built-in social and mobile capabilities right at the core. Companies who want to build the next generation of apps that work instantly on any mobile device, that's why we doubled the number of developer mobile packs this quarter, giving them more freedom to choose the tools and frameworks they need to build apps back and the Salesforce platform continues to be our fastest growing product line and as the only solution rated by Forrester as the leader at every single public cloud platform category. The combination of our customer company vision and our clear leadership in each of these core markets is what's driving our success with customers today and that's why we continue to close some of the most exciting and strategic transactions in the industry and let me just touch on a few of them right now. We had an amazing win in the quarter with Sysco, not CISCO, but SYSCO one of the world's largest food service distributors. In over last two years, Sysco has been standardizing on Salesforce as it CRM platform across sales service and marketing wrapping its SAP implementation. An incredible relationship, where Salesforce is the front-end and SAP is the back-end and delighted amounts that in the quarter Sysco decided to bring the Salesforce platform into the core of its company-wide Sysco 360 initiative and we are looking forward to helping Sysco deliver on its vision of enriching their customers experience and driving growth. Sysco is one of the most exciting companies in the world in its industry and we are delighted to be partnered with Sysco and delighted to be partnered with the SAP and delivering this incredible capability. This is a great undertaking from Sysco and one of the largest platform transactions in our history. I want to congratulate our entire team on the incredible success with Sysco We closed an exciting transaction in luxury retail this quarter with one of the world's most iconic brands Louis Vuitton. Retailers going through a incredible transformation with every major retailer having to decide how they will connect their customers in a whole new way. Louis Vuitton is revolutionizing their experience for customers in more than 460 stores around the world with a new mobile client telling app powered by our Sales, Service and Platform clouds. More than 3,000 sales associates will soon have relevant customer insights right at their finger tips allowing to deliver personalized experience with a high standard of luxury and innovation that Louis Vuitton is known for. Louis Vuitton is a fantastic company with an amazing product line and an incredible distribution strategy and we are delighted to be powering Louis Vuitton and Pearson, the world's leading learning company has selected the sales cloud, the service cloud and the Salesforce Platform to completely change the way they sell, service and market to students and educators online in the classroom and on their mobile devices and we continue to see amazing momentum in Europe with the Financial Conduct Authority, which regulates the entire financial services industry in the United Kingdom selected Salesforce in the quarter to develop an agile platform that will enable and quickly respond the changing requirements to managing their interactions with more than 27,000 financial services firms in the United Kingdom. In every one of these examples, and there are thousands more, companies are transforming their business with Salesforce.com social and mobile cloud technologies. Our ability to deeply integrate our next-generation customer platform with legacy back office systems, like I mentioned with SAP, or Microsoft, or even Oracle is helping many of our customers transform into customer companies and other new are at on transactions in the second quarter included incredible new relationships with AIG, Bristol-Myers, Fiat, Hitachi, Home Depot, Johnson & Johnson, Juniper, Mercedes-Benz, National Australia Bank, [Novartis], Pfizer, Procter & Gamble, [JHM], Sony, Western Union and Yahoo!. The pace at which these technologies are being consumed and the pace at, which these companies are embracing our social and mobile cloud technologies is phenomenal. Our service continues to support and deliver transactions for customers at an unprecedented scale as these companies transform to these new paradigms and I am thrilled to announce that we delivered 86 billion transactions in the quarter, up 46% from a year ago, 86 billion customer transactions in the quarter. Just compare that with any other enterprise software company or any other enterprise cloud company. Salesforce.com is once again leading the industry with this incredible breakthrough number of 86 billion completed transactions of the quarter. That's an average of more than 1.3 billion customer transaction each and every business day with the security, reliability and availability that Salesforce.com has been known for. Nothing speaks more to the value of Salesforce than the usage of our products with the speed, reliability and trust that we are known for. We work hard to get our customer success, we work hard for our customers trust and we work hard for our customers' adoption each and every day. Now, before I close I would like to remind you that we are just two weeks away for one of the most exciting market and events of the year, ExactTarget connections and all these meetings with all of you in Indianapolis, where we expect that more than 6,000 customers to experience the future of marketing. It's taking place from September 17th to the 19th and I will be there to help kick things off and I hope to see you there as well. It's going be a phenomenal, phenomenal event on the future of marketing. Then in just a few months, we will be at Dreamforce, the largest technology event in the world. Over a 120,000 customers will join us at Dreamforce and Dreamforce will take place right here in San Francisco from November 18th to 21st. Get it on your schedule, because advanced registration has already far exceeded our expectations and we are now expecting now more than the 120,000 customers registered to attend. It will be the industry's largest gathering with more than 350 next-generation technology companies and Salesforce partners in one of the world's largest cloud, mobile and social expose ever and over 1,100 breakout sessions, helping our customers to become educated on the future of our industry. I am thrilled to have a number of very special guests joining us, including Sheryl Sandberg, the Chief Operating Officer of Facebook, who will be one of the keynotes of Dreamforce, Marissa Mayer, the CEO of Yahoo!, also one of the keynotes at Dreamforce, as well as Personal Development Specialist Deepak Chopra and Wayne Dyer, also joining us as keynotes at Dreamforce and I am delighted to announce the musical entertainment and their first ever corporate presentation of the incredible group, Green Day. So, please register now while there is still availability. Go to dreamforce.com. Now with that, I want to hand it over to Graham Smith, to touch on the incredible financial results of Salesforce.com's second quarter. Graham?

All right. Thanks, Marc. We delivered another strong quarter in Q2, driven by solid business fundamentals and we showed great results across key financial metrics, including revenue, deferred revenue, and operating cash flow. In fact, we exceeded the high-end of our revenue guidance even when we exclude the revenue contribution from ExactTarget. Let me provide you with the detail on our second quarter results, starting with revenue. Second quarter revenue was $957 million, up 31% over Q2 last year. Excluding an approximate $7 million FX headwind, second quarter revenue was up 32% year-over-year. ExactTarget contributed $16 million dollars of revenue in the second quarter, which was higher than we had forecast as a result of the transaction closing earlier than we had anticipated. Looking at year-over-year growth, on a regional basis, revenue in the Americas grew 34% to $679 million. Revenue in Europe grew 39% in dollars and 34% in constant currency to $174 million. Revenue in Asia increased 6% in dollars and 19% in constant currency to $105 million. That's a slight improvement for the region. Dollar attrition continued its slow and steady decline in the second quarter marking it the 16th consecutive quarter of sequential decline and remained very solidly in the low double-digit percentage range. Turning to margins. Our Q2 non-GAAP gross margin was 80.7%. That's about 60 basis points lower than Q2 last year. Our second quarter non-GAAP operating margin was 10.2% or about 240 basis points lower than last year. The decline in both the gross and operating margin was due to the acquisition of ExactTarget, as well as increased costs related to the agreement we signed with Oracle during Q2. While the two transactions are impacting near-term profitability, we are working hard to find synergies in cost savings which will mitigate their impact this year and into the future. From a headcount perspective, we added more than 2,200 new employees in the second quarter including approximately 1,900 from ExactTarget bringing our total headcount to more than 12,500. That's up 43% over Q2 last year and double where we were in Q2 of fiscal 2012. Turning to EPS. Second quarter GAAP EPS was $0.12. Our Q2 GAAP EPS reflects a non-cash benefit of approximately $129 million related to a partial release of the tax valuation allowance we established in Q3 last year. Our consolidated deferred tax balances changed primarily due to the acquisition of ExactTarget's intangible assets. These acquired intangibles result in future book amortization expense, but no equivalent tax deduction, which gives rise to future tax liability. We were able to reverse the valuation allowance to the extent that our deferred tax assets will be offset by the ExactTarget deferred tax liability. On a non-GAAP basis, second quarter EPS was $0.09. Non-GAAP EPS was better than we expected due to the higher than anticipated ExactTarget revenue and a slightly lower share count and forecast offset by a higher non-GAAP tax rate. Turning to cash flow. Second quarter operating cash flow was $183 million, up 34% over Q2 of last year. Operating cash flow in the second quarter benefited from higher than anticipated collections, offset by about $30 million in transaction fees and other acquisition costs. CapEx in the second quarter was $102 million, up from approximately $30 million in Q2 last year. The year-over-year increase in CapEx was principally related to new office build outs and the IP licensing agreement that we discussed on our call last quarter. As a result CapEx, as a percentage of revenue, in the second quarter was 11%. That's up from just 4% in Q2 last year. For the full year though, we expect CapEx, as a percent of revenue, to be around 8%, slightly higher than in previous years. Free cash flow which we define as operating cash flow less CapEx was $81 million in the second quarter. That's down from $107 million in Q2 last year. Turning to the balance sheet. We ended the quarter with approximately $930 million in cash and marketable securities, including proceeds from a $300 million term loan utilized in connection with the ExactTarget acquisition. Accounts receivable was up 34% over last year to just around $600 million. Deferred revenue in the second quarter was $1.79 billion, up 34% over Q2 last year. Deferred revenue in the second quarter benefited from approximately $44 million related to our acquisition of ExactTarget, and from a year-over-year FX tailwind of approximately $1 million. On a sequential quarter basis, deferred revenue benefited from an FX tailwind to the tune of around $4 million. Deferred revenue also continued to benefit from the residual effects of the multiyear invoices and from the continued shift toward annual billing. The combined benefit to deferred revenue in Q2 was approximately $85 million, down from approximately $100 million, sequentially, and from a $120 million in Q2 last year. ExactTarget will undoubtedly add an even greater level of complexity to our billing frequency metrics as we seek to move ExactTarget customers to annual billing over time. Excluding ExactTarget, approximately 70% of all Salesforce invoices were issued with annual terms in Q2, compared with approximately 65% of invoices in Q2 last year. This five-point improvement to annual invoicing in the second quarter compares with an eight-point improvement in Q2 last year. That's the headwind to year-over-year deferred revenue growth. Unbilled deferred revenue, or revenue that is contracted but not yet invoiced and that's off the balance sheet was approximately $3.8 billion in Q2. That's an increase of 36% over last year. This unbilled deferred revenue balance excludes the fair value of ExactTarget's unbilled deferred revenue which totaled approximately $137 million. Even though this amount is unbilled because of purchase accounting rules, it has to be recorded on our balance sheet under accounts payable, accrued expenses and other liabilities as both current and non-current customer liability. The invoices related to this balance are issued and now should roll into a regular deferred revenue balance. Before I turn to guidance, I want to give you a brief update on ExactTarget, combining ExactTarget with our existing marketing cloud, is providing greater level of synergies. And as a result, we are reducing our total headcount by approximately 200 people. We anticipate that the cost of this reduction will reduce fiscal 2014 non-GAAP EPS by about $0.01. Scott Dorsey, ExactTarget's CEO will lead the newly combined organization. Turning to guidance, we are pleased to be raising our full year 2014 revenue outlook range to $4.025 billion as Marc mentioned the year-over-year growth of 31% to 32%. This guidance includes approximately $140 million to $145 million revenue contribution from ExactTarget, and that's up from prior guidance of $120 million to $125 million as a result of a $16 million revenue contribution we got in Q2. For Q3, we anticipate revenue in the range of $1.05 billion to $1.055 billion. Inclusive of ExactTarget, that represents year-over-year growth of approximately 33% to 34%. We are raising our full year non-GAAP EPS estimate to $0.32 to $0.34, and we expect Q3 non-GAAP EPS in the range of $0.08 to $0.09. As a reminder, our biggest Dreamforce ever that Marc just talked about will be held in our fiscal fourth quarter which has a significant impact on our Q4 EPS, and is reflected in our guidance. These EPS ranges imply a full year non-GAAP tax rate of 38% and a Q3 non-GAAP tax rate of 39%. On higher net interest expense, which we anticipate will trend at similar levels to the second quarter throughout the second half of the year. We continue to expect FY'14 operating cash flow to grow in the low-teens percentage range year-over-year as we discussed when we announced the ExactTarget transaction in June. For Q3, we also expect year-over-year deferred revenue growth in the high 20% range, excluding ExactTarget. At our forecast exchange rates, we will also face a roughly two-percentage point FX headwind to year-over-year deferred revenue growth. We anticipate the deferred revenue from ExactTarget in the third quarter will be flat to slightly up from the Q2 number of $44 million. As a reminder, all of the underlying assumptions for our GAAP and non-GAAP guidance and the complete GAAP to non-GAAP reconciliation can be found in our earnings press release issued today. To conclude, Q2 was a very exciting and transformational quarter for Salesforce. In addition to solid financial results, we closed the largest acquisition on history and added proven leader to Salesforce including Keith Black to lead salseforce's Global Sales Service and the Alliance Organization and Scott Dorsey, of course, to lead the market in cloud. We have never been in a better position to capture new market and penetrate deeper into the enterprise than we are today. We look forward to seeing many of you during our analyst sessions at the ExactTarget Connections Conference in Indianapolis on September 17. With that, we will open the call up for questions.

(Operator Instructions). Your first question comes from the line of Kash Rangan with Bank of America Merrill Lynch. Kash Rangan - Bank of America Merrill Lynch: One question for you, Marc. As you have begun to integrate ExactTarget, you have also brought on board two high profile executives from Oracle, Keith Block and Tony Fernicola. I guess my question is, what are the changes that you foresee in the sales organization, go-to-market, as a result of a lot of important developments that have happened this quarter. A question for you, Graham. The ExactTarget, the program, the contribution is a lot higher than we would have expected. I am just wondering if the invoicing terms also change in particular that side of the business and how you foresee that impacting your billings? Thanks very much. That's it from me.

Well, thanks so much for that question, Kash. I want to tell you that as the CEO of Salesforce, I have really got three priorities that are extremely important to me. The first is, the continued development of our flagship products, Salesforce.com, our sales service platform. All I am focused on right now is delivering an incredible new version of Salesforce.com at Dreamforce. An incredible new version that is anchored to the cloud, to mobile and social capabilities. Number two, I am extremely focused on the success of ExactTarget. I couldn't be more excited about this acquisition, about Scott Dorsey, about the leadership team in Indianapolis and also the speed at which the acquisition and the integration is going and how it's going to impact our company and provide our customers the ability to connect with their customers in a whole new way. Number three, I am extremely excited about Keith Block. We are able to bring in a fantastic new executive to help lead our global customer facing operations. Keith, as you know, runs all sales and service and vertical solutions, anything that we are going to market with Keith is responsible for. He has done a phenomenal job and he is completely rebuilding his management team. As you have already seen, he has brought in perhaps the most successful sales executive from Oracle of all time, Tony Fernicola, somebody who we have had a relationship with since we started the company, but never had the motivation to join the company before Keith came in. We are so excited that we are able to say that we are taking what was a world class sales and service organization and taking it to a whole new level under the leadership of Keith and he has put in an incredible new management team. So those are the three things that I am really excited about and I will turn over to Graham for the second part of the question.

Yes, Kash. So obviously there is a haircut on deferred revenue that calculates at around 30%. We haven't yet, I think Scott and the team at ExactTarget are really just at the beginning of implementing some of our annual billing policy. So right now, there is clearly no effect from that. It's very difficult for me to estimate at this point just over a month into this how quickly that will go. We will give you an update on that as things progress.

Your next question comes from the line of Brent Thill with UBS. Brent Thill - UBS: Just a quick follow-up on the go-to market. You have unveiled numerous offerings and I am just curious if you could give us your view of how you are simplifying the packaging in that go-to-market? Whether through the use of social ELAs or it looks like even then the new performance edition coming in November that package is more for a higher price? Can you give us a sense of how you are thinking strategically about that? Thanks.

Sure, that's a great question, Brent. I really appreciate it. Number one, we have simplified our product line into really four critical products which is our sales cloud and it's highly differentiated offering that gets the competition especially with our human performance capabilities at work.com, with our integrated data capabilities with data.com and with the integrated campaign and marketing capabilities of Pardot and of course it is uniquely position as being mobile, social and cloud. Number two, we have really redacted that to not just the sales cloud, but also the service cloud, the marketing cloud and the platform and those four core offerings give us the ability to then package those in a variety of additions ranging from products that are uniquely created for small businesses all the way up to the enterprise. And as we tune those packages, we found opportunities to bundle in a lot of these new features and functions that we have built, but perhaps have not been able to sell or fully delivered to our customers either because they didn't know about it or there wasn't something that was available at their time of purchase, so we have a tremendous upgrade opportunity and that's how we look at the performance addition. It's a phenomenal product, it's an incredible new capability for existing customers to take their capabilities to a new level and it's a tremendous level of optimization on our existing pricing structure.

Your next question comes from the line of Karl Keirstead with BMO Capital. Karl Keirstead - BMO Capital: Yes. Quick question for Graham. Graham, you mentioned that the ExactTarget revenue [contribution] for year would be [140 to 145]. At the time of the deal, you mentioned 128. I'm just wondering what the cause of that delta is versus our performance or anything else? Thanks for any color.

Sure, Karl. It was the $16 million that we recognized in Q2 that related to ExactTarget. When we built the deal model it was tough to know exactly which day the transaction would close on, so we clearly planned conservatively and we got transaction closed much earlier than we anticipated and so picked up about $16 million in Q2. So you add that to the 120 and 125 and a little extra and you get to the 140 to 145.

Your next question comes from the line of Mark Murphy with Piper Jaffray. Mark Murphy - Piper Jaffray: Thank you very much. Marc, regarding Keith Block and the concept of trying to take enterprise sales to the next level, it seems to be challenging to name an enterprise software company that's been more successful than Salesforce.com with enterprise sales. Because in the last 18 months you have closed several transactions that were roughly $100 million each and they have been transformational and Fortune 100 companies and on a scale that seems to be unparallel in this industry, so just wondering how can it be the case that something can be improved there. Also, do you think the Keith Block's impact on ELAs and other large transactions would be positive or neutral or negative in the second half of the fiscal or will the changes happen more in Q1?

Well, thanks for that set of compliments. I really appreciate it. And Salesforce.com has done incredibly well. One of the ways that Salesforce.com has done so well is, that we have a full portfolio of transactions for small, medium and large business. One thing Salesforce.com has never fully optimized for is, enterprise distribution and the ability to reach the largest customers in the world with highly customized solutions for their industries and their verticals. To do that, we have to bring in a team and a leader who is able to speak to the executives the largest and most important companies in the world to show them that it's not just a one-off solution in this industry or with this company, but they can do it for their whole industry and for all the companies of that industry. You saw how Keith executed that strategy extremely well at Oracle over the last 26 years and we look forward to seeing him execute a very similar strategy enhanced for Salesforce and our unique capabilities and we have already seen him make major changes and we are very excited about his strategy. Of course, this is a time of extreme growth for Salesforce we are always doing, which has been so exciting. Here is a quarter, 31% growth quarter, and at the same time, we are bringing in phenomenal new distribution leaders to take the company to a whole new level. And not just at Keith's level or at his direct report level, but in every layer of our distribution team, we have found opportunities for optimization, for change, for growth, for evolution to bring in real enterprise leadership to make this a world class effort, and Keith has all of my support. We have also added him to our Board of Directors and given him the title of Vice Chairman to make it crystal clear to our organization that he is the leader of our distribution organization going forward, and is responsible for all customer facing operations. He is helping us to lead this incredible transformation that's been unbelievably positive so far and we couldn't be more thrilled with having him on board.

Your next question comes from the line of Kirk Materne with Evercore. Kirk Materne - Evercore: Marc, I was just wondering if you could comment really quickly on what we are seeing more broadly around the marketing cloud with the Omnicom and Publicis deal earlier this quarter. I guess what does that say about some of the trends we are seeing in terms of bigger organizations trying to shift to this customer competent paradigm. I guess, how should we view these bigger advertising agencies in relation to CRM, in terms of partnering and/or potentially competing overtime? Thanks.

Well, those are two great organizations. You look at them, these leading marketing agencies, both as the leaders in those field and I have relationships with both of those CEOs. They are phenomenal executives, phenomenal companies. They have a phenomenal presence with these very large customers helping to articulate their strategy. They have grown really dramatically through acquisition. It's a strategy that both companies very much have deployed. I think they are probably at the end of that at this point. I don't know what other companies are going to get combined into those organizations. What our hope is, is that we are going to be able to partner with these marketing agencies to provide them with the technology necessary to enable their customers to connect with their customers in a whole new way. It doesn't take a very big leap to see that these agencies are phenomenal in so many areas. Coupled with our capabilities of delivering world class cloud, social, and mobile solutions, we can really take their customers' capabilities to new level. I view marketing as a huge growth area for Salesforce. By 2017, Gartner says, CMOs will spend more than CIOs on technology. It's one of the reasons we bought ExactTarget and many other companies as we positioned to be the number one player in marketing and you will continue to see us to focus on that effort. As I said, one of my top three priorities is making ExactTarget a major success for Salesforce.com.

Your next question comes from the line of Rick Sherlund with Nomura. Rick Sherlund - Nomura: First congratulations on Keith and Tony. Marc, your comments on SAP seemed a little more muted this quarter. You mentioned partnership with Sysco. I am wondering, if perhaps, there is an opportunity for you to do greater product integration with SAP as we just heard about from Oracle. For Graham, you mentioned the billing terms for ExactTarget being different. I wonder if you could share with us what those are?

Well, Rick, I really appreciate that. I will tell you that I think that companies like Oracle and SAP who have not been able to bring their product lines to the cloud, who have not been able to make the movement to social, who have not been able to make the movement to mobile can benefit from alliances with Salesforce.com, with our brand luster, with our innovation and you heard in the quarter a phenomenal call between myself and Larry Ellison, where Oracle has announced that they are going to be using Salesforce.com as their CRM. That was incredible to hear Larry talk about that. Certainly it's my hope and I believe that we will be able to develop and trade a similar alliance with SAP. I believe it's in the interest of their customers and our customers that Salesforce works well with Oracle. It works well with SAP and even works well with Microsoft because our customers have these existing investments that we want to leverage. That SAP relationship is a great relationship with, as I mentioned this quarter, the huge success with Sysco where we were able to take their huge investment in SAP back office and put on a customer facing capability that they badly needed but SAP was not able to deliver for them. I believe there is a lot of SAP customers that are in a similar position, who can use highly customized applications maybe with our force.com platform or even with our primary capabilities of our sales and service cloud and will have the ability to both, those on to these existing SAP infrastructures or even put those on top of these emerging HANA implementations, where we can really bring more value and applications to these data stores.

I was just going to answer Rick's question on the billing terms for ExactTarget. At the moment, a little over half of their billings are done monthly. Then there's around about a quarter of their billing are done quarterly and then the rest is and at least so it looks very different to salesforce and clearly as I mentioned earlier, Scott and his team will be working on transitioning their customers towards annual over time. They have a slightly different revenue make up. They obviously have more services than we do for example and services is typically always build monthly, so I am not sure we will get to exactly the same ratios as the salesforce has, but clearly big opportunity over the next few years to generate strong cash flow and to reduce administration costs by moving them to more to annual billing.

Your next question comes from the line of Terry Tillman with Raymond James. Terry Tillman - Raymond James: Good afternoon and thanks for taking my question. Marc, the question for you in terms of post-closing of the ExactTarget transaction. Will your salesforce have pre-range to sell ET products and when do we think about maybe potentially starting to see some revenue synergies from such activity? Thanks.

Well, that's just a fabulous question and I will tell you it's something that we already are seeing revenue synergies. It's something that we are already focused on and our core salesforce which is, as multi-thousand person sales organizations, something that ExactTarget did not have, is getting the key aspects of having that relationship where we are giving our core salesforce the ability to have a sale with ExactTarget is like a sales of any other of our other clouds. I believe that's extremely important for us to be able to truly get the value out of ExactTarget, but there is no difference between selling the salesforce ExactTarget marketing cloud, the sales cloud, the service cloud or the platform if you are a core salesforce.com sales professional and to that extent, we are partnering them very closely with the existing ExactTarget sales organization. We are also working very hard to expand the existing ExactTarget sales organization which is something that's been rather boutique and I believe it has the opportunity to be expanded as well and give us the ability to have that tremendous core confidence and we are doing that by combining our existing marketing cloud sales team with the ExactTarget sales team and having one unified marketing cloud sales team. Now that process will take a period of time to come to a complete fruition, where we have a total synergy, but we've made tremendous gains in the short period of time. And, as I said, it's one of the important things that I work on every day and I expect us to make continued gains this quarter and the following quarter and be able to give some very good updates on that as we start our next fiscal year. Certainly, ExactTarget is a critical part of salesforce.com's growth engine. It's something that every salesforce.com customer wants to know about and we have a huge vision for ExactTarget, where we can really show our customers how they are able to connect with customers not just through their sales force, not just through their customer service organization, but through email, but through text. Through social, through all these other customer touch points that are so critical to them and ExactTarget is a critical part of that and a huge part of our message and we will be tightening that message. By the time, we get to Dreamforce, you will see it fully delivered. You will also see the beginning of that message at the Connections Conference in September with ExactTarget in Indianapolis.

Your next question comes from the line of with Nandan Amladi with Deutsche Bank. Jobin Mathew - Deutsche Bank: This is actually Jobin sitting in on behalf of Nandan Amladi. Two questions. So you mentioned ExactTarget billings comes from, that a part that comes from your business comes from services. So what portion of ExactTarget's billings comes from services?

It's about 20% Jobin, just over 20%, and obviously just compare with that, it's less than 10%. So what I pointed it now.

Your next question comes from the line of Nathan Schneiderman with Roth Capital. Nathan Schneiderman - Roth Capital: Marc, it seems like Facebook is enjoying accelerating momentum as an advertising platform and that would seem to be positive for your Buddy Media business. I was curious what metrics you are tracking for Buddy that you can share with us to help us understand the progress with that business line?

Well, we continue to focus on Buddy Media and also another really exciting offering that we have which I am sure you have seen which is social.com, where you can actually buy Facebook apps directly online and help us to deliver that distribution capacity. It is part of and becoming part of, what I call, our complete Salesforce.com ExactTarget marketing cloud. The Salesforce.com ExactTarget Marketing Cloud has to include not just all the capabilities of ExactTarget, which so many folks have become known for their tremendous capabilities with the email, their tremendous capabilities with mobile, their tremendous capabilities in social but also with our ready and fixed asset, with our Buddy Media asset and also with our social.com asset. What you will see emerge is a comprehensive application that allows our customers to manage all aspects of those customer touchpoints. That is going to continue to expand our work with Facebook and you didn't mention it but Twitter is extremely important to us and other social graphs that are providing advertising support. We want our customers to be able to connect with all of these and have a comprehensive solution that manages all of their customer capability.

Your next question comes from the line of Ross MacMillan will Jefferies. Ross MacMillan - Jefferies: Marc, I am just curious about timing. As you bring ET into the fold, you have obviously had success with Pardot on the Sales Cloud. Is it premature to assume that you would have ET fully integrated into the product lineup by the time your reinforce or should we be really thinking about it being integrated for the next fiscal year? Any color on that would be great. Thanks.

Well, there is different levels of integration. I think you have got to look at integration as a spectrum because today, of course, we have AppExchange integration where we have already done some integration with these products but we can do more. Because we own these assets now, we can do native integration. The first area where we were doing tremendous work and really want to have deeply integrated native capability and this is one that is certainly by Dreamforce, we want to able to show our customers how Pardot is deeply integrated into our Sales Cloud, not just at user interface level, but deeply integrated in to our core as well. Our Chief Technology Officer, this is a major goal for him, for this quarter as to make sure that Pardot is well integrated into our Sales Cloud and that our Sales Cloud customers have the ability to start using that capability as fast as possible and with outstanding integration. Number two, with ExactTarget, this very much is something that not only we see ExactTarget integrated into our core clouds, but we will integrate our core clouds and reverse into ExactTarget. If you have seen ExactTarget capabilities with its Fuel user interface, we have the opportunity to bring in our services from our core clouds. into ExactTarget, a great area where today they don't do a lot of work, for example might be in customer service or maybe in another core area we are able to start to leverage our core services back to ExactTarget and that's something that we are going to want to do overtime as well.

Your next question comes from the line of Phil Winslow with Credit Suisse. Mr. Winslow, your line is open.

We will take the next question, operator. Thanks.

Yes, sir. Your next question comes from the line of Steve Ashley with Robert W. Baird. Steven Ashley - Robert W. Baird: The marketing cloud. In terms of capability to support corporate website marketing, I know ET recently acquired iGoDigital, giving them some capability there. Is that a capability that you would look or want to build out further in the future?

Well, there is no doubt that mobile is a critical part of what we are doing. And, whether it's, iGoDigital or some of the other capabilities in those areas as well as our investments in some of these great MDM companies, we are going to find some really great leverage and the ability to deliver a world-class offering through ExactTarget. I think a lot of folks didn't really understand ExactTarget's capabilities. Their technology in this area is probably as deep as anyone or anything that I've ever seen and what we really need to do now is, we need to help them to communicate. It's a tremendous asset that they have and we need to do that through product marketing as well through development of a world-class sales organization.

Your last question comes from the line of David Hilal with FBR. David Hilal - FBR: Marc, regarding the upcoming release of winter 2014, are there a few new features functionality that you think are more than incremental that will help maybe catalyze prospective customers who are on the fence to get on the right side of the fence. Anything you might offer up or maybe have a little more interest with that platform? Thank you.

Well, I think that there is more than a few a few, but you are going to have to wait until June for us to articulate the full value proposition of what we are doing and our exciting new vision for the future and the changes that we have made to our core platform that is going to enable a whole new generation of capabilities in sales and service, in marketing and building custom mobile applications as well. Thanks so much. It's been a great quarter at salesforce. We couldn't be more excited about everything that's going on. We are looking forward to seeing you at Connections, we are looking forward to seeing you at Dreamforce. So I will be on Mad Money tonight with the Jim Cramer and I look forward to seeing you all in Indianapolis.

This concludes today's conference call. You may now disconnect.