Salesforce.com faces scrutiny as Wall St frets over cloud spending

By Noel Randewich

SAN FRANCISCO (Reuters) - Salesforce.com's (NYSE: CRM) quarterly report will be under the microscope after the bell on Wednesday as Wall Street searches for new signs of trouble in spending on cloud software.

The world's largest maker of online sales software is seen as a barometer for the cloud-computing sector, where valuations took a major hit earlier this month after a dismal sales outlook from Tableau Software (NYSE: DATA).

With investors trying to figure out whether the poor reports from Tableau and a handful of others are company-specific or indicative of trouble across the sector, Salesforce's report will be watched more closely than normal.

“Investors will look to the Salesforce.com results for signs that businesses may be beginning to slow their spending because they are worried about the economy,” said JMP Securities analyst Patrick Walravens.

Its shares were down 1.8 percent at $61.78 ahead of the report and have slumped 22 percent in 2016. Options bets implied traders expect Salesforce's stock to move 8.7 percent in either direction by the end of the week.

San Francisco-based Salesforce has benefited as more businesses choose cheaper and easier software services delivered online, with no software directly installed on PCs.

Reflecting the hyper-adoption of cloud computing technology in recent years, the company is seen posting a 23.9-percent increase in revenue for the fourth quarter to $1.79 billion, according to Thomson Reuters data.

It is expected to post earnings of 19 cents per share for the quarter, which ended in January. Salesforce is expected to forecast fiscal 2017 revenue around $8.081 billion.

Salesforce.com's stock trades at multiples implying Wall Street expects years of massive growth. The shares are at 63 times expected earnings, compared to 17 for Microsoft (NASDAQ: MSFT) and 13 for Oracle (NYSE: ORCL).

Of the analysts tracked by Thomson Reuters, 43 recommend buying Salesforce's shares while just one recommends selling and two have "hold" ratings.

(Reporting by Noel Randewich, additional reporting by David Gaffen in New York; Editing by Nick Zieminski)

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