Good afternoon. My name is David, and I will be your conference operator today. At this time, I would like to welcome everyone to the Salesforce.com Q1 Fiscal Results Conference Call. [Operator Instructions] I would now like to turn the call over to Mr. David Havlek, Vice President of Investor Relations. Sir, you may begin your conference.

Thanks, David. I'd like to welcome everyone to Salesforce.com's first quarter fiscal year 2012 results call. Joining me to discuss our results today as always are: Marc Benioff, Chairman and CEO; and Graham Smith, our CFO. Following our prepared remarks, we'll open things up for your questions. As always I ask as a courtesy to your peers, please limit yourself to one question today. A complete disclosure of our first quarter results can be found in a press release issued about an hour ago, as well as in our Form 8-K filed with the SEC. Additional financial information, including detailed historical financial statements and facts, is available on our website. Our commentary today will primarily be in non-GAAP terms. Reconciliations between GAAP and non-GAAP metrics for both our reported results and our forward guidance can be found in our press release. At times in our prepared comments today or in responses to your questions, we may offer incremental metrics to provide a greater understanding of our business or our quarterly results. Please be advised that some of these disclosures are one time in nature and we may or cannot update those metrics in the future. Also of importance, beginning in the third quarter, we will no longer be reporting our customer count metric on a quarterly basis. We said we plan to update that metrics when we receive notable milestones. We're making this change because recent acquisitions, primarily Heroku and Manymoon, have added a large number of users. Linking those users to specific customer organizations can be extremely challenging and in some cases impossible. As result, we believe our traditional customer metric will become less meaningful overtime. We plan to report the customer metric using our traditional measure one last time in Q2. With that, let me make this call…

Thanks, David. Our first quarter was indeed a fantastic kickoff to fiscal year 2012, continuing the momentum we experienced in fiscal year 2011. And I'm thrilled to report that just one quarter into our fiscal year, we have crossed the threshold of the $2 billion annual revenue run rate. As you can see from the revenue, we are absolutely delighted now to be at a new level of performance of our company, and our revenue growth rate is accelerating. Let me begin by briefly reviewing some of our financial highlights of the quarter. Revenue of $504 million was 34% from the year-ago quarter. Deferred revenue also accelerated to $915 million, a 38% year-over-year increase. Incredible. And we also delivered $140 million of operating cash flow. And over the past 12 months, we've generated roughly $460 million in operating cash, an increase of more than 40% from a year-ago period. Finally, David, we are pleased to be able to raise revenue guidance to $2.15 billion to $2.17 billion, a significant increase once again to our revenue guidance for fiscal year 2012, and our second increase this year, the first one after we acquired Radian6. Now I'd like to say a few words about Japan and the Japan disaster before we begin. First of all, let me personally and on behalf of Salesforce.com and our employees and our shareholders, send our condolences to the victims of the Japan disaster. Our sadness is overwhelming, and we are deeply with you, and we send our wishes for a quick recovery. Now like many companies, of course, our business is also affected by the earthquake in Japan. However, the diligence of our Japan team ended the quarter closer to their original plan than we could really have ever expected. In fact, one of our 10…

Thanks, Marc. Q1 was an exciting start to fiscal 2012. Revenues of $504 million rose 34% year-over-year, well above our outlook entering the quarter. This significant overachievement was a result of three factors. First, the strong new business performance that Marc described earlier; second, there was significant strengthening in the euro and the yen; and then finally, continued reduction in our attrition rate. On the attrition front, our dollar attrition when compared to year ago, continued its steady decline from its peak back in the second quarter of fiscal 2010. But remains in the mid-teens percentage. Obviously in improving global economy, it's helping customer retention rates but given its importance, we're continuing to invest in areas critical to customer success, such as customer onboarding, enhanced training and usage analysis and predictive monitoring. Because the cost to renew and grow existing customers is much lower than the cost of acquiring new ones, these efforts are an extremely important part of our long-term growth strategy. Turning next to geographic performance, we saw strength in all three major geographies. In Q1, Americas revenue rose 31% year-over-year to approximately $340 million. International revenue rose 40% in dollars, and 53% in constant currency versus the year-ago quarter, and now represents roughly 33% of total company revenue. That's up from 31% a year ago. The stronger euro and yen contributed roughly 2 points of FX benefit to our reported company revenue growth in Q1. Looking at some regional details, in EMEA, revenues of $94 million rose 41% in dollars, and 36% in constant currency. And in Asia, revenue increased by 38% in dollars and 29% in constant currency to roughly $70 million. Marc already mentioned our Japan business and looking ahead, it's difficult to predict the extent or duration of the current slowdown. Our revenue growth…

[Operator Instructions] Your first question comes from the line of Laura Lederman of William Blair. Laura Lederman - William Blair & Company L.L.C.: A few quick questions. One is, I remember when I first started looking at you guys, what was it, like 9 years ago now, a big deal was like 1,000 seats and not much revenue, and then a big deal became $3 million and 100,000 seats. I'm just trying to get a sense of how big a big deal is these days, any way that you want to quantify them, just to give us color on big, and then I'll follow up with one other.

Well, there's basically 2 types of deals here at Salesforce. There's extraordinary deals which are eight-digit deals, and there's big deals that are seven-digit deals. And that's -- we're regularly seeing now eight-digit deals, and that's very exciting for us. Thanks for the question. Laura Lederman - William Blair & Company L.L.C.: And real quickly, can you talk a little bit about what you do with Radian6 in terms of taking it down market, and then maybe also building a broader marketing cloud?

I think that Radian6 is a super-exciting product. I think we are extremely fortunate to be able to acquire this company. It's on a revenue tear, as you know. It's probably the fastest-growing of all the cloud computing companies that I've ever seen. The management team is spectacular. I think that probably one of the best parts of the acquisition was the CEO. Marcel is just a tremendous executive and a great new addition to Salesforce.com's management team. Each of their executives that I've met and their individual employees just have a very unique view and a very powerful view of the future of our industry. It certainly does set the foundation, for a marketing cloud, for Salesforce. It's the right place to start a marketing cloud when you look at today's world that's being driven by social networks. The most important thing in marketing is what's going on in these communities, and your brand has become a realtime conversation. It's not about advertising anymore. It's not about campaigns. It's not about events. It's all about the conversation on the Internet. And Radian6 is the leader in monitoring and managing that conversation for more than half of the Fortune 100. And they're really just getting going. It's a great team, great product, great technology. And if you haven't seen it, Laura, you get an account at radian6.com and you can sign up with the keywords that manage to you -- that are key to you, like all of the accounts that you follow, all the executives you follow, the products you follow, the competitors you follow. You put all that in, and Radian6 is going to give you the information you need to make better decisions. So it really is the beginning of the marketing cloud.

And your next question comes from the line of Mark Murphy of Piper Jaffray.

Marc, this level of growth is very rare for a multibillion-dollar company. And so I'm just wondering to what extent should we attribute this growth rate to the effect of some of your newer, viral or premium products like Chatter.com, Database.com and Heroku, just in terms of their ability to expand your addressable customer base and maybe trigger a different perception in the developer community?

Well, what I really think is we are seeing an extraordinary growth rate, and we were meeting yesterday, reviewing the top 10 software companies in the world and their size and our ranking in them, and then we really look at how long is it going to take us to get into the top 5, which we really think is the really -- the doable next step for Salesforce.com. Of course, we're going to be the biggest cloud player, but we want to be one of the top five software companies in the world. That's our next goal. You've seen us pass $2 billion, you're going to see us pass $3 billion. I think that, that is just -- you can see it in our run rate, you can see it in our deferred, you can see the momentum that we have around the world. No success is linear, that's something that Mike Odel always tells me and I believe that. But I also look at 9 quarters now accelerating revenue run rate. Pretty awesome. And we see a big buying environment out there. And as I said, I met with 170 customers this quarter. They're all buying. And they're all looking to rebuild their enterprises. And we have to execute against that opportunity. Sales execution is a difficult thing, as you know. We did make a major investment last year. We've talked extensively with you about a 40% increase in our distribution. Organization, the vast majority of that is really probably yet to come online. And that's, as I've said publicly before, the upside. We have great products, The Sales Cloud, we've got The Service Cloud, we've got Jigsaw, we've got Radian6, we've got the Force.com platform, we've got Chatter. We've got plenty to sell. Customers want this next…

Your next question comes from the line of Kash Rangan of Merrill Lynch.

Marc, when I look at the business, I mean there's probably several things that are driving this acceleration, not the least of which is distribution, new seats, your retention is improving, you're upselling to the platform addition, you've got more seats at existing customers, and you've got new products. I know that's a laundry list, but if you think about each of these things, if you can, which of these is likely to be an endearing source of growth for the company, as you look at the next step, at the remainder of this fiscal year? And also, I don't know if you can comment at all, security in the cloud is taking a bit of an issue, our focus shall we say, following the Sony, Amazon developments. I'm just curious, if you can give us an update on how you're securing The Salesforce Cloud. Thank you very much.

Sure, I'll take that first. I mean, I think that, as I've said publicly, and if you go to my Wikipedia page, you can see a report that I wrote in 2005 to the President of the United States on the cyber security as a crisis, a prioritization for the government and for a lot of companies. And I think that cyber security is tough. There's no finish line when it comes to cyber security. Everybody's got problems. Everybody will have problems. Computers are not perfect. And you've got to double-down on cyber security if you're in our business, and honestly if you're in any business. I really think that this is one of the reasons that we are more successful, is because our customers cannot do this. It's tough. And there's no finish line when it comes the security. And there is no perfection when it comes to security. So we have to work harder and we have to be a surrogate for a lot of our customers in providing that capability. I think one area that we have a unique model that we've benefited from, is I think every day, maybe 2 or 3 of our customers show up and do security reviews with us. They're reviewing our data centers. They're reviewing our code. They're reviewing our networks. In many cases, those customers are only doing a couple of security reviews themselves a year. They've got an out-vendor, I don't know how many vendors Sony has, for example. We're obviously a vendor to Sony, but in terms of cyber security to Sony, how many vendors do they have checking their technology on a regular basis. Most companies have a couple, they check it a couple of times a year. We're fortunate, we've got people checking us every day. Is that the panacea? Is that going to be -- is that the be-all end-all? No, it's not. And so we have to -- we have to double-down, everybody does. And if it's, as I said at the Gartner symposium last year, if security is not your number one issue for your company, it should be. In regards to kind of reliability issues, with Amazon, they obviously had a problem. They got through it. They're obviously stronger for it, it's one of the benefits of the model. We've had our own reliability issues along the way, I'm sure you remember, and no computer is perfect. But if you look at, for example, our operating history now, over 12 years of operating in our service, I think we're about better than any of our customers. I don't know a customer that's had better reliability in operating history than Salesforce.com over the last decade. So I think cloud computing is the right model. Will there be issues? Of course. And we've got, or you've got to deal with those issues head-on and move on. And that's the reality of our industry.

And Kash also asked about enduring growth levers.

When I look at growth and the importance of what we do for our customers, I would say the most important thing that we do is that we're a database. And the way to look at us, what we're doing, these hundreds of millions of database transactions every single day for our customers and it's growing, it grew to 60% year-over-year, that's my number one metric. I don't really look that much at the sales numbers. I don't really look that much at the revenue numbers. I'm mostly looking at the transaction numbers. I want to know, are customers using this product? Are they managing and storing their data in the system? Are we providing value to these customers? And that's why for years now, we've provided the transparency to you, our investors, so that you can also watch these numbers. We're unique in that. Microsoft has no such thing. There is no trust.microsoft.com, it's an oxymoron. There's no trust.oracle.com. There is no trust.SAP.com. The very thought of it makes them cringe in horror. But for us and for you, we need to see trust.salesforce.com to see the level of performance, growth, to see when things are going well, to see where things are not going well, to make sure that we're improving, and to make sure we have our -- keep our eye on the ball. There's nothing more important to our company than the trusted success of our customers. And that's why we have trust.salesforce.com. And I believe also, as we've seen with important and critical announcements that have been made by regulators around the world, transparency, like we're talking about, is going to be critical to cloud computing. The trust and transparency will be the hallmark of the services that we provide to our customers around the world.

And your next question comes from the line of Brent Thill of UBS.

Graham, just 2 quick questions. Deferred was obviously less than seasonal and a lot better than any of us had modeled. Other than FX, was there any header impact that impacted DR this quarter? And then just second, if you could just follow up and remind us, what was your lowest attrition level? And it seems like now you're in the mid-teens, that feels like it can still go down to the low-teens?

Sure. Now there was, in terms of deferred revenue, Brent, there was nothing unusual in terms of a shift in our billing mix or anything like that. We had very, very consistent receivables kind of profile in the first quarter. We just had a really, really strong invoicing quarter. And obviously, that's why we feel better about our cash flow forecast for the remainder of the year as well. So no unusual things in deferred revenue number other than currency, as you mentioned. In terms of attrition, my recollection was when we first started reporting a dollar attrition number, it was sort of in the mid-teens, and I think it went up into the high-teens, and now it's obviously come back down into the mid-teens. So I don't have data that sort of dates back 3, 4, 5 years, even before I was at the company. So it would be pretty difficult I think to go back and reconstruct that. So I've always said, I think, publicly, that we feel with the right set of circumstances, with the right economic backdrop, with the right programs in place internally, we could get attrition, hopefully, into the low-teens. But as you can tell, even though we're putting a lot into this, and the economy is definitely improving, it's a slow decline. So we just want to keep that steady decline each quarter going.

And your next question is from the line of Ross MacMillan of Jefferies & Company. Ross MacMillan - Jefferies & Company, Inc.: Marc, I wondered if you could just talk a little bit about the platform. And what should we be looking at this year in terms of development that you'll bring? And how we should be thinking about its evolution and contribution to billings or to sales?

Well, the platform is, by far, our most important product. It's our differentiator. It's our third most used feature by all of our customers. It's really the heart and soul of the company. And kind of just taking on the comments on the database, we don't really make a CRM app. We have a core through The Sales Cloud and The Service Cloud, and when we demo that and show it, it looks like an app, but really it's a platform. It really is about our customers' ability to get in there to customize the tabs, the fields, the screen layouts, to write the triggers, the stored procedures, the remote procedure calls, to add in the social networking, to integrate it with the services that they use, to tie in to our APIs. That's why we bought a company last year, Sitemaster, because websites have become so important to our customers as an integrated part of their CRM experience. And that's why we bought Heroku. And we look at the platform as a critical part of what we do for our customers and certainly when we talk about these extraordinary transactions that we have. Like the ones that we're talking about on the call today, these are platform-driven opportunities. When we're in there, we're winning these deals because when you use our platform, it's just not like anything else that's out there. It's not a fixed app. It's not a fixed app in your e-mail. It's not a fixed app running on your PC. It's a database that lets you manage and share your information at a much lower cost, to integrate it deeply into the social networks and run it on your mobile devices. And this is really what customers want. And they integrate it into your websites. And they integrate it into your Internet sites. And they build custom apps, and on and on and on. And as we look at the heat maps for our customers, we look at how far is the platform driving into their enterprises. We had a customer speaker at our management meeting a couple of weeks ago, and they've put up a heat map of how far we've gotten into their enterprises. There were 15 apps that they had built, all in the platform. And that's very much our strategy in our customers.

And your next question comes from the line of Tom Ernst of Deutsche Bank.

It's actually Stan Zlotsky sitting in for Tom. Very quick ones. Europe continues to be strong for you. Anything in there that's really driving that growth? I mean, even in constant currency, it still continues to be strong. And second, have you seen any lengthening of sales cycles in Japan due to the disaster there?

Well, I think that all territories continue to be strong. And Europe is strong, the U.S. is strong and Asia is strong. And Japan, relative to what is going on there, is strong. And I'm making my first visit there since the disaster next week. And as I said in the script, we are surprised at how close that the numbers are for Japan and our Japan pipelines, and so forth. I'll assess in detail next week. But our brand and our commitment to Japan, I think, has never been stronger. And we will double-down on our commitments to Japan. And we hope to be able to show customers through our outstanding reliability, scalability and availability during the disaster, that we are absolutely the right thing for Japan. Our data center in Tokyo is running well in test mode. It had no interruptions during this disaster. And we will turn it on to production shortly as well, which will be great for Japanese customers. And we continue to expect a very strong Japanese business.

And your next question comes from the line of Robert Breza of RBC Capital Markets.

Marc, I'm wondering if you can talk a little bit about your comments. You said customers are buying more. I mean, how are you seeing that, or can you help us just characterize it? Is that more seats, additional new products or longer-term contract? Just like to drill into that a little bit more.

Well, I'll tell you that what I see in the enterprise buying environment is that the recession is behind these customers and that we're in the recovery. It may not be as big as everybody hopes it to be, but the reality is we are in recovery. And in addition to that, that customers want to buy new technology. And they want to buy new solutions. They recognize they need to upgrade and enhance what they have, that we're moving into this new world and they need to move their systems into that world. And that the traditional approach is not the right approach for them and that they're looking to new vendors, which are us and other cloud vendors, to make the transformation.

And your next question is from Walter Pritchard of Citigroup.

This is Robert for Walter. Just a question on -- a question on some of the larger deals. I think last question you guys talked about a pretty good diversity in the mix of large deals across product lines. And I'm just wondering if you're sort of seeing the same pattern here where you're getting a lot of traction outside of Sales and Service Cloud?

I think we're -- yes, Graham, do you want to answer that?

Sure. Yes, we had a -- I mean, you could tell obviously we had a very strong new business quarter, and I think we continue to see the same nice mix of products, nice mix of geographies, and we had a really good slate of large transactions as well in the first quarter, which has not always been the case here, particularly in the tougher economy a couple of years back. So it's a really excellent quarter all-around.

Your next question comes from Brad Zelnick from Macquarie.

Marc, I'm curious if there are any updates that you can give us on VMForce. And I was also hoping with cloud foundry being introduced in the quarter, I wanted to get your thoughts on the model that they proposed? And just can you remind us, to what extent are the concepts of cloud and virtualization overlapping? How do you see this playing out in the world?

Well, I think the first and most important thing about virtualization is, you have to remember that the vast majority of sales of virtualization software to enterprises to create what has been called the private clouds are exactly that, it's software. It's a software product that you buy, install, upgrade and maintain to virtualize your servers, to make them more efficient. It's definitely a innovative step in the history of our industry where you can load software onto a server that may have not had the level of efficiency that you want as a large corporate customer, and you make that server be able to run multiple applications and multiple databases and multiple operating systems through this virtualization software. And that is virtualization. But that's not cloud computing, right? I mean that's not the public cloud. That's not the low-cost, efficient, shared model. That's not the 100,000 customers that we have running on 2,500 shared PCs. That's not kind of our cloud brethren, right, which are the very fast-growing companies who are delivering services. These are companies who are more running multi-tenant architectures, that are shared systems, that are delivering these applications directly over the Internet to millions of customers around the world. And that is the difference between kind of, what I would say our cloud computing model and the false cloud. And the false cloud, I think, is a cloud in name only, but I think when our industry shakes out, you'll see that this new model of public cloud computing will be the dominant model that enterprises will have automated themselves with just as it is, the dominant model that consumers automate themselves with.

The final question comes from Brendan Barnicle of Pacific Crest Securities.

Marc, I was wondering what additional functionality that you either want to add to or build for as you think about the marketing cloud?

Well, I think we're really at the beginning of the marketing cloud story. We're just starting in marketing. We're not -- I think that we just took delivery of Radian6 a couple of weeks ago. We're just starting to really understand what customers want. There's obviously a broad range of areas that we can move into in regard to marketing. Honestly, the problem is we're in a lot of things already that are hot. So I mean we're in collaboration that's hot. We're in sales that's hot. We're in service that's hot. We're in platform that's very hot. We're in data that's very hot. And now we're touching marketing. But before we, like, rush ahead and do building out the marketing cloud, which we obviously could easily do, because there's a lot of exciting assets there, there's a lot of exciting companies there. But we're very cautious about doing that because if we go ahead and build that out right now, what will suffer? What will we have our eye off the ball in one of these other critical areas? And that -- so I would say we're at the beginning of that, and certainly we've got a tremendous, tremendous position with a tremendous company with Radian6. And from there, we will, I'm sure, build a complete and full product line, but it's not an urgent item on my agenda.

Before we wrap up, I just want to remind everyone here quickly of a couple of events that Salesforce.com executives will be attending in the next few weeks. On June 6, in New York City, we'll be at the BofA Merrill Lynch Conference, Graham Smith will be our presenting executive. And on June 15 in Chicago, the William Blair Conference, George Hu, our Executive Vice President of Platform and Marketing will be our presenting executive. We look forward to seeing you all.

Also just in case anybody cares, on June 2 in Washington DC, I'll be at our Cloudforce program -- oh, sorry, June 1, I'll be doing Cloudforce in Washington DC, where we'll be preventing a number of new technologies, including Radian6. And also, I'll be in Boston on June 16, presenting our corporate overview, strategy and, again, giving new technologies. Thanks, David, for letting me interrupt back there.

We may as well remind everybody to register here now early in Austin for Dreamforce. We look forward to seeing you there as well. So thank you for joining us today. Give us a shout here at Investor Relations if you have any follow-ups. Have a great day.

Ladies and gentlemen, this does conclude today's conference. Thank you for your participation. You may now disconnect.