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

Kash Rangan - Merrill Lynch Heather Bellini - Goldman Sachs Tom Roderick - Stifel Jason Maynard Wells Fargo Brad Zelnick - Macquarie Brent Thill - UBS David Hilal - FBR Mark Murphy - Piper Jaffray Kirk Materne - Evercore Keith Weiss - Morgan Stanley Rick Sherlund - Nomura.

Good afternoon. My name is Josh, and I will be your conference operator today. At this time, I would like to welcome everyone to the salesforce.com Fiscal Q3 2014 Earnings 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.

I would now like to turn the call over to Mr. John Cummings. Sir, you may begin..

Thanks so much, Josh, and good afternoon, everyone. Thank you for joining us today to discuss our fiscal third quarter 2014 results. Our third 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 the 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 open with a few prepared remarks then we will open the call for questions.

As always, 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 the future. It's also possible we may reference certain unreleased services or features not yet available, because we cannot guarantee the 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 third 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. So with all that, I will turn it over to Marc..

Okay. Thanks, John, and welcome everyone to Dreamforce 2013 and we are coming to you live right here in the Moscone Center in San Francisco.

Today, we are kicking off our 11th annual Dreamforce, now the world's largest software conference with an all-time high of more than 130,000 registered to attend with today's early start and we expect even more tomorrow. And I am thrilled to report just absolute monster quarter and a new all-time high in our financial results for the third quarter.

Just four years after delivering our first $1 billion year, salesforce is now the first enterprise cloud computing company to report more than $1 billion in revenue in a single quarter and we are projecting more than $5 billion in revenue next year. Pretty awesome. A phenomenal milestone for salesforce and the entire new cloud industry.

Congratulations to all of our customers, our partners and our employees for this amazing achievement. Now let's get to the financial results. Revenue for the third quarter rose to nearly $1.08 billion, up 36% from a year ago.

There is just no other Top 10 enterprise software company that is delivering this kind of growth and we are delivering this growth while pushing through the $4 billion dollar revenue milestone and we are heading right to $5 billion.

I don't know any company who has delivered a $1 billion quarter and was growing 36% in our enterprise software industry. Deferred revenue rose by more than 34% year-over-year finishing the quarter at more than $1.7 billion and operating cash flow rose to $138 million for the quarter, an increase of 30% year-over-year.

The dollar value of booked business, on and off the balance sheet, is now nearly $6 billion and our momentum going into Dreamforce positions us for a strong finish to the year.

We are increasing our revenue guidance range by $30 million to finish fiscal year 2014 now at over $4.05 billion, a growth of 33% year-over-year and we are well placed for even more success next year. I am thrilled to announce that we expect to deliver fiscal year 2015 revenue in the range of $5.15 billion to $5.2 billion. Yes, it's true.

salesforce.com is going to be the first enterprise cloud company to deliver more than $5 billion in revenue next year. s salesforce.com has always been a catalyst and evangelist for innovation in enterprise software. We have pioneered the shift to cloud, social, mobile and connected.

And today, with the next-generation of technology, our customers are connecting with their customers in entirely new ways. We are now entering the third wave of computing where everything is connected and soon there is going to be 50 billion connected products on the internet of things and behind every device, every app, everything is a customer.

That's why customer relationship management have just never been more important than it is today. You have got to be ready to sell, to service, to market to your customers regardless of where the customer touch point is.

This is really the internet of customers, where companies connect to their customers through the next generation of devices, apps and services.

Here at Dreamforce, we are unveiling Salesforce1, a radically new customer platform that was built from the ground up to deliver the speed, agility and power of salesforce, but re-imagined for a social, mobile and cloud and connected devices world. A world that we call the internet of customers.

It's the world's first CRM platform for everyone, for developers, for ISVs, for admins, for end-users and, most of all, for your customers. So you can go social, mobile, cloud and get connected.

At my keynote, we will demonstrate how Salesforce1 connects everything, all of apps, all of your devices, all of your customer data to completely transform the way customers sell, service, market and innovate. And you know what, in today's world, everything has changed. One of the key tenets of Salesforce1 is that was built API first.

It was built mobile first. It was built first for the phone. It was billed first for the tablet.

Everything has changed and we realized at salesforce.com that we have been completely changed ourselves in that why customers have made Salesforce the world's number one CRM platform and clear leader in each of our four core markets with the Sales Cloud, the Service Cloud, the ExactTarget, Marketing Cloud and the Salesforce1 platform.

Our flagship Sales Cloud is the world's number one platform for sales and it's helping customers drive phenomenal sales performance and the top line growth that everyone wants.

Partners rated the Sales Cloud of the undisputed leader in its magic quadrant for sales force automation for seven straight years and I am thrilled that Salesforce was recently recognized by CRM Magazine.

It's a number one CRM solution and every single category again for enterprise, for midmarket and small business and I want to give you a little secret.

If you want to know how salesforce.com deliver that phenomenal growth at this phenomenal scale, it was through the Sales Cloud, [via through the] Salesforce and the Sales Cloud is a great example where is the key to growing our business at this incredible rate.

The Service Cloud is the world's number one platform for customer service and support and the only platform that ties customer service with sales and social and that's why salesforce.com is the recognized leader in Gartner's Magic Quadrant for customer service as well as the leader in the latest Forrester Wave for customer service and you are going to see some phenomenal, phenomenal demonstrations of the service cloud and the new version of the Service Cloud built on Salesforce1 in tomorrow keynote.

In fact, one of the phenomenal demonstrations you will see is Philips, who has built an incredible new Ultrasound device built with the Service Cloud platform right into the right into the product.

You just hit the product and you go right to our Service Cloud, so if you are Ultrasound technician and you are in a hospital and you need help right there in there, the Service Cloud is always available to you. And the ExactTarget Marketing Cloud is the next-generation customer platform for one-to-one marketing.

It's the only 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 whether it's e-mail, social, web, mobile or any type of product.

With the combination of ExactTarget and Radian6, Buddy, media and social comp, we have a powerhouse in marketing which is why Facebook recently gave the ExactTarget Marketing Cloud it's word for innovation.

The Salesforce1 platform is the number one platform for developing next-generation cloud apps and the only solution rated by Forrester as a leader in every single public cloud platform category that's why the growth of our developer and ISV communities been nothing short of spectacular and you are going to see just an increase in that as you see our new Salesforce1 platform now with 10 times more APIs than ever before.

We now have more than 1.4 million developers on our platform, an increase 75% from last year ISV community grew more than 70% since the third quarter of last year and we have already had more than 250 major ISVs including DocuSign and Evernote; and LinkedIn who signed up to build next-generation of apps on the Salesforce1 app exchange.

In addition, more than 15 ISVs, who are live on Salesforce1 today, tomorrow you are going to see a phenomenal demonstration using this Rocketship that's Sony just released called the PlayStation 4 which has been built on top of the combination of the salesforce.com, Marketing Cloud and the Salesforce platform, giving them the ability to reach their customers in entirely new way and you are going to see that live in the keynote.

The combination of our vision and clear leadership in each of these four core markets is what's driving our success with customers and that's why we continue to close some of the exciting, those strategic transactions in the industry.

Now, first, I am delighted to announce, we have extended our relationship dramatically with Hewlett Packard in the quarter. HP started sales transformation with the Sales Cloud, and now with the addition of the Service Cloud and the Salesforce platform, HP plans to transform the way they connect with their entire ecosystem of customers and partners.

Just moments ago, Salesforce and HP also announced a new strategic partnership in cloud computing to jointly develop and market the Salesforce HP Superpod.

The Superpod gives our largest customers the choice to have all the speed of performance of the salesforce multi-tenant software with a dedicated instance running on HP hardware and you will hear more about our partnership tomorrow when Meg Whitman joins me on stage with my opening keynote to announce the Salesforce HP Superpod.

It is phenomenal what our two companies have done by working together. Another great capability in the quarter came out of Roche, the global leader in research-focused healthcare. In the quarter they decided to standardize globally on the Service Cloud for its major divisions to create a 360 degree with every customer.

Roche will be able to connect their diagnostic equipment with doctors and lab technicians giving them real-time alerts and notifications on patient tests and with salesforce communities powered by the salesforce platform Roche, we will be able to instantly connect sales reps and service engineers and all of their healthcare stakeholders to create a community that puts the patient at the center of their care.

And I am thrilled to announce that we have closed an exciting transaction with Safeway, one of the largest and most important grocery retailers in North America and Safeway chose salesforce to be its new e-mail, mobile, push and notifications platform for the internet of customers.

Safeway will us the exact target marketing cloud to scale its personal customer communications and deliver a consistent experience across through e-mail and mobile channels and with the salesforce platform, Safeway will be able to connect its entire team of marketers, giving them a single place to manage and track campaigns.

No matter what the customer touch point, Safeway will be there to reach them with a consistent clear message using the new salesforce ExactTarget Marketing Cloud and it's a new capability to connect to the Internet of customers. And in every one of these, examples companies are transforming their businesses with salesforce's customer technologies.

Other new or add-on transactions in the third quarter include Ace Hardware, AMEX, Australian Post, Bristol-Myers, Condé Nast, Fujitsu, Intuit, Merck, Nippon, Nissan, Novartis, Pfizer, U.S. Department of Labor, and we also welcomed Vanguard as a new customer for salesforce.

The pace at which these companies are using embracing our sales, service, marketing and platform technologies is phenomenal. Our service continues to support and deliver transactions for customers at an unprecedented scale.

I am thrilled to announce that we delivered nearly 100 billion transactions in the quarter, up 47% from a year ago, an average of more than 1.5 billion customer transactions every day. And guess what, that's just salesforce's core service. It doesn't include the 1 billion transactions every single day in ExactTarget.

Nothing speaks more to the value of salesforce than the actual usage of our products with the speed, and reliability and trust that we are known for. I look forward to seeing everyone at our Dreamforce keynote tomorrow at 9:00 AM Pacific and you better get there plenty early if you want a seat.

Because with 130,000 people arriving here in San Francisco to attend this conference, it is going to be hard to get in pretty much anywhere.

With some of the world's leading companies, ADP, HP, Philips, Sony and others that I have mentioned on this script are going to making major announcements and showing some phenomenal new technology in the keynote. Now if you can't get there physically, it is also going to be broadcast live on Dreamforce.com. So tune in that way.

It is just like having a front row seat, while without having one.

So, also joining me on this week on that stage will be a number of special guests including Sheryl Sandberg, Marissa Mayer, Prime Minister of Haiti, motivational guru Deepak Chopra, Wayne Dyer, oncologist David Agus, UCSF Chancellor, Susan Desmond-Hellmann, as I mentioned, Meg Whitman and don't forget about some phenomenal events that we are going to have this week.

Tomorrow night, we are going to host a spectacular evening of entertainment for our annual benefit concert, the Concerts For Kids. We have raised over $6 million for our two Bay Area children's hospital, the UCSF Benioff Children's Hospital and the Children's Hospital & Research Center Oakland.

And I am thrilled that Green Day is going to be headlining this event in its first private concert ever. Awesome. And with special performances by Blondie and also MC Hammer, this is going to be a spectacular event. Also don't forget about our top customer event, happening on Wednesday night featuring Jerry Seinfeld and Tony Bennett.

Look there is still time to buy tickets at www.theconcertforkids.com. I am looking forward to seeing everyone there. And with that, I am going to turn this over to Graham to discuss the financial details of our third-quarter..

All right. Thank you, Marc. We posted another great quarter in Q3, delivering outstanding growth in revenue, deferred revenue and operating cash flow. We saw strength across the enterprise and commercial businesses in both Americas and Europe, with the added bonus of ExactTarget delivering a fantastic first full quarter as part of salesforce.

Let me take you through the highlights. Starting with revenue. Third quarter revenue was $1.076 billion. That's up 36% over Q3 last year or 37% in constant currency. ExactTarget and Pardot contributed approximately $81 million to revenue in the third quarter which was well above what we had anticipated.

The sales and renewals teams executed well and in addition messaging and professional services revenue were also really strong. While on the subject of ExactTarget and Pardot, let me just take a moment to provide a quick update on integration efforts.

The sales teams are working well together with lead processes yielding some great new customer wins for ExactTarget and Pardot. The engineering organizations are coordinating development plans and you will see some of the initial results as soon as tomorrow's keynote, which are integrated into the ExactTarget Marketing Cloud.

We are really pleased with progress today. Looking at year-over-year growth on a regional basis, revenue in Americas grew 41% to $769 million. Revenue in Europe grew 46% in dollars and 39% in constant currency to $195 million, and revenue in Asia increased 4% in dollars and 17% in constant currency to $112 million.

Dollar attrition continued its slow and steady decline in the third quarter marking more than four years of sustained improvement and remains in the very low double-digit percentage range. Turning to margins, our Q3 non-GAAP gross margin was 79.3% or about 116 basis points lower than Q3 last year.

Our third quarter non-GAAP operating margin was 8.6% or about 118 basis points lower than last year. This is largely the result of the acquisition of ExactTarget and also the Oracle license agreement we signed back in May.

From a headcount perspective, we added approximately 200 net new employees net in the third quarter, which means we have added about 3,000 year-to-date bringing our total headcount to nearly 12,800. That's up 37% over Q3 last year.

I would also like to remind people that we did have a reduction enforce of approximately 250 people early on during the third quarter. Third quarter non-GAAP EPS was $0.09. Our Q3 non-GAAP effective tax rate came in lower than expected, which offset some of the extra investments and marketing programs we made ahead of Dreamforce in our fourth quarter.

Our third quarter operating cash flow was $138 million. That's up 30% over Q3 last year. Operating cash flow was a little ahead of our expectations due to strong collections and improving ExactTarget cash performance. CapEx in the third quarter was $73 million, up from approximately $51 million in Q3 last year.

The year-over-year increase in CapEx was principally related to ExactTarget capital expenditures and new office build outs. CapEx as a percentage of revenue in the third quarter was up slightly to 7% from Q3 last year, and for the full year we now expect CapEx overall as a percentage of revenue to be about 7%.

That's a little less than we had previously anticipated. Free cash flow, which we define as operating cash flow less CapEx was $65 million in the third quarter. That's up $10 million or 90% from Q3 last year. Turning to the balance sheet, we ended the quarter with approximately $1.1 billion in cash and marketable securities.

Accounts receivable was up 44% over last year to $604 million. Deferred revenue ended the third quarter at $1.73 billion. That's up 34% over Q3 last year, including approximately $65 million related to ExactTarget and no meaningful impact from year-over-year foreign exchange.

On a sequential quarter basis, deferred revenue benefited from an FX tailwind of approximately $12 million. Deferred revenue also continued to benefit from the residual effects of our multiyear invoices and from the continued shift toward annual billing. The combined benefit to deferred revenue in Q3 was approximately $67 million.

That's down from $85 million sequentially and from $110 million in Q3 last year. We were delighted to record a strong deferred revenue results for Exact Target.

When we started our efforts to be more deliberate about annual invoicing in the fourth quarter of fiscal 2012, the deferred revenue benefit from the shift was about $150 million or about 11% of the deferred revenue balance versus the benefit of approximately 4% of deferred revenue in the third quarter results we are reporting today.

Given this declining impact, Q4 will be the last quarter. That's next quarter, we will provide the next, the specific dollar impacts to deferred revenue, however we will continue to get a sense of proportion of invoicing issued on an annual terms each quarter. In the third quarter, approximately 72% of all subscription and support related invoices.

This is excluding ExactTarget, were issued with annual terms compared with approximately 65% of invoices in Q3 last year. Unbilled deferred revenue or revenue that is contracted but not yet invoiced and is off the balance sheet, was approximately $4.2 billion in Q3. That's an increase of around 40% from last year.

Turning to guidance, we are delighted to be raising our full year 2014 revenue outlook by $30 million, so the range is now $4.05 billion to $4.055 billion. That's for year-over-year growth of approximately 33%. This guidance includes approximately $180 million of revenue from ExactTarget and Pardot.

That's up from prior guidance of $140 million to $145 million. The full year guidance implies fourth quarter revenue in the range of approximately $1.124 billion to $1.129 billion, again that's inclusive of ExactTarget and that represents year-over-year growth of approximately 35%.

As Marc mentioned, we are initiating fiscal 2015 guidance today at $5.15 billion to $5.2 billion. At the mid range of the guidance range is or the midpoint, I should say, of the guidance range is this initial view implies fiscal 2015 full year revenue growth of approximately $0.28.

Clearly this guidance is provided without the benefit of knowing our fourth quarter new business and attrition numbers and they can both have a significant impact on the following year. So will clearly update this in February on our call. The guidance also assumes that FX rates remain in approximately the same range as they are currently.

We are narrowing the range on our full year non-GAAP EPS estimate for fiscal 2014 to $0.33 to $0.34. That's versus $0.32 to $0.34 range we gave on the last call, which implies Q4 non-GAAP EPS in the range of $0.05 to $0.06.

As a reminder, Dreamforce will cost approximately $0.02 cents of non-GAAP EPS and, of course, that is reflected in our fourth quarter guidance. These EPS estimates assume a full year non-GAAP tax rate of 35%, a Q4 non-GAAP tax rate of 36% and a Q4 net interest expense at a similar level to Q3.

The cash flow, we reiterate our expectation for fiscal 2014 operating cash flow will grow in the low teens percentage range year-over-year. Excluding ExactTarget, we expect year-over-year deferred revenue growth in the mid to high 20s percent range.

Of course, on top of that, we expect ExactTarget to contribute about $70 million to deferred revenue in Q4. And our forecast exchange rates, we will also face a roughly 2 percentage point FX headwind for year-over-year deferred revenue growth.

As a reminder, all of the underlying assumptions for our GAAP and non-GAAP guidance and a complete GAAP to non-GAAP reconciliation can be found in our earnings press release issued earlier today. All right. To close, Q3 was just another great quarter for salesforce.

We saw strong execution from our sales and renewals organizations, including ExactTarget. We were delighted by the many exciting customer wins and expansions which reflects our broadening role as a strategic CRM solutions provider. We couldn't be better positioned for a strong finish to fiscal 2014 and for the continued strong growth in fiscal 2015.

So with that, we will open the call up for questions..

(Operator Instructions). Your first question comes from Kash Rangan with Merrill Lynch..

(inaudible) much. I think it's the 36th to 37th quarter I am following you guys as a public company. Nice to see the $1 billion mark. You have said some time that you could hit the $1 billion in revenue annual but here on a quarterly basis. So congrats on that. Marc, question for you.

With respect to the platform business, it looks like we are seeing a big inflection point here, a number of developers and your optimism surrounding the ISV community seems to be ramping up.

Can you talk a little bit more about what could be the impact of Salesforce1 in terms of incremental new platform opportunities that you can pursue that you couldn't before? That's it for me. Thank you..

Well, Kash, you are going to hear about it tomorrow but let me just give you some highlights. Salesforce1 is a completely new approach to our platform as well as to our sales cloud, service cloud and marketing cloud.

I have been using it myself from the last six months and it's completely changed how I run salesforce.com and I think it will completely change how our customers run their company and also connect with their customers as well.

And what I can tell you, is the power of Salesforce1 is all the things that our customers expect of salesforce, that is the huge ability to manage information, stored procedures, stored triggers, custom user interfaces but things that they did not think that we would feel to do we are doing. Number one, Visualforce1.

You are going to see that all the huge amount of seen all huge amount of Visualforce development that our customers have made, it's going to start running immediately on phones and on tablets. That's phenomenal and you can see that already happening.

All you have to do is go to the App Store or Google Play Store now and you can get the iPhone as well as the android versions of Salesforce1 to mobile app, but all that Visualforce capability coming right down to mobile devices, Visualforce is a phenomenal technology for user interfaces and you are going to see that.

Number two, you will also see 10 times more APIs now available, because if you are going to actually write like we did with these mobile apps directly to Salesforce, you need a huge amount of new API coverage so that you can build super high functionality in your in your app.

Number three, not only via Visualforce not only via the APIs you have this phenomenal new Salesforce publisher, which looks a lot like Line from Naver. The idea is that you can have a portfolio of actions in apps to access Salesforce1 is.

So what Salesforce1 is? Number one, you can build all your own custom actions and those actions appear right inside the publisher. Number two, you can add apps directly into the publisher.

Things like Evernote and Dropbox and all kinds of cool ISVs and you are going to see new ISVs appear where you have a ton of ISVs who built these custom objects and it's off the hook. Then it's not just great for developers, but it's also great for admins. You will see that there is a new app in the App Store called SalesforceA.

In SalesforceA, is, A is for admins, and that app lets administrators manage their Salesforce applications for the first time right from the phone or a tablet and you can even customize Salesforce directly from SalesforceA.

You are going to see tomorrow the ability to have custom branding right from SalesforceA, so you can make it exactly for your company. Then it's not just great for developers and admins, it's also great for end users as well which is super important, because you know I don't use a laptop anymore. You know that. I don't even use an iPad.

I only use this iPhone 5, and I need to run the company from that and I do and that's the power of Salesforce1, which is just tremendous capability, so you got tremendous support for developers, tremendous support for ISVs, tremendous support for admins, tremendous support for end users.

Finally, tremendous support for your customers because with Salesforce communities that is the glue that connects everybody back into Salesforce1. When you [equate] stop one of these Salesforce communities, those committees automatically then integrate into the social network that's built-into Salesforce1.

You are going to see a whole new range of applications. I don't know any other enterprise software company who has built both, core apps and platform ISVs for developer support and delivered it on the phone.

The phone dominates how we use computing today, but has enterprise software made it to the phone besides e-mail? I don't think so, but Salesforce1 does it and it's a phenomenal product.

We have already had this in the hands of hundreds of customers over last six months, we have been doing extensive testing on it and the feedback has been phenomenal and I expect the feedback will continue to be phenomenal to show and this is only version one, so we have plenty more planned over the next year, because as you know we are doing three releases a year.

Okay.

Did you have the second?.

No. That was it..

Okay. All right. Very good. Thanks, Kash..

Your next question comes from Heather Bellini with Goldman Sachs..

Thank you. I had a couple of questions for Graham and one for you, Marc.

I guess, one, Marc, given how successful you continue to be in the top line growth that your are posting on top of very large number, how do we think about the leverage that you can start flowing through to the model as we look out and I know that you probably don't want to give fiscal year '15 guidance on that, but if you could just share with us some qualitative thoughts.

Then for you, Graham, I was wondering if you could share with us where you are in the process of migrating ExactTarget customers to annual billing terms. Thank you..

Well, here is how I look at it, which is, you know, there's a balance between growth and profitability and we want to continue to do both. We want to continue to grow and deliver these outrageous growth numbers, but honestly we also want to continue to increase our margin. We continue to want to become more profitable.

Now there's times when that slows down when we buy a company or we go through a hiring surge or something like that, but for the most part, our goal is to increase our margin and we want to continue to do that in a very strong way and we also, though, want to continue to grow this company and get it over the $10 billion revenue mark.

That's also a super strong goal of this company. So those two things have got to go hand-in-hand. We have learned a lot about how do that. You can see here, Heather. You were there with me in the client server world. You can look back, how many companies when they hit the $1 billion revenue line work delivering a 36% growth quarter.

One of the results we are able to do it is because we have got that balance right. We have it right but we also know that there's more that we can do on profitability and that we are absolutely actually committed to that.

And as I said, the only time that really ever gets slowed down in a serious way is when we acquire something or do one of these hiring surges.

So, Graham?.

Yes. On annual billings, Heather, we are really pleased with what we saw. I am not ready yet to give a ton of detail on all of the ExactTarget billings performance here.

I think we want to see a couple of quarters but suffice to say, when we look at the new business trends versus last year, the annual billing percentage was up very significantly, more than, in fact, on new business. More than we had seen on our salesforce ship.

So really very exciting on the new business side and of course, that shows up on the deferred revenue number. We had guided more or less flat on ExactTarget deferred revenue of $45 million and they came in around $65 million. So we were delighted to see that. It's clearly a function that we are shifting customers to annual billing..

And your next question comes Tom Roderick with Stifel..

Hi, guys. Good afternoon. So I noticed you spoke very highly about the ExactTarget acquisition, of course, and the numbers keep coming in better than expectation.

Can you just maybe give a little more detail in terms of how the topline synergies have worked here? What is bringing the numbers ahead of expectations and relative to any potential cross sell, particularly I am thinking about service cloud opportunities in retail? Can you talk about how the cross sell of that has been going? Thanks..

Well, that is phenomenal and you know, I have to say of the reasons we see this increasing growth, one of the reasons you see this kind of accelerated revenue growth this year is, we have got a lot more focused on our core mission which allowed us to cross sell more.

You probably remember that a couple years ago that we were really focused on defining the social and enterprise and that was very exciting to us. A highly collaborative enterprise built on social technologies.

But what we recognize was, when we went into a customer, who is the buyer of the social enterprise, and it was a little tricky to find that buyer. Now when we go in to find the sales cloud buyer, the service cloud buyer, the marketing cloud buyer, the platform buyer, we know who they are and that has been an accelerator on our growth.

We bundle that together in this approach called the customer company and that we are really the first enterprise software company to be focused on customer technologies because we know who the buyers are and our customers for customer technologies and that has really been an accelerator for us, a focuser for us.

And to your point, it lets us cross sell because we have a clear point of focus with our employees that we are the customer company, we are the company that helps you to connect with your customers in the new way with the sales cloud, the service cloud, the marketing cloud and the platform built entirely on Salesforce1.

And once you start to build and deploy on Salesforce1, you can have this phenomenal experience. I was just with Jeff Immelta couple of weeks ago and he took out his iPhone and he said, you know Marc, there is only two apps that use every single day to run General Electric and one of them is salesforce.

And he showed me exactly how he uses what is now Salesforce1 and I will just tell you, it just completely blew me away that I can use to it run my company, he can use to run his company.

When we are customer focused executives and when we get that kind of environment where a company that has a culture so focused on their customers, we know we are going to have phenomenal cross sell opportunities. When you are here at the show, make sure you talk to our customers.

You are going to see a lot of them are starting to buy multiple clouds and that's a huge compensation opportunity as well for us with our own account executives..

Your next question comes from Jason Maynard with Wells Fargo..

Good afternoon, guys, and congratulations. Marc, I had a question for you. Years ago there was all these (Inaudible) of the sales force automation market and you clearly expanded tam there.

As you move in and start messaging more about internet of customers, can you talk a little bit about how you guys are in solve what, I think you are hearing more in the industry that app gap, all of this sort of unautomated you know process and stuff that happens in companies that doesn't really benefit from packaged applications, maybe touch a little bit on what are you guys trying to do to, if you will, drive deeper into organizations and really close, if you will, that technology gap that so many companies have?.

Well, I will tell you that that's going to be a big part of my keynote tomorrow that most companies don't know who their customers are still.

I know that's hard to believe and that most companies feel that they are not ready for this social mobile cloud world and the third one is there is that app gap, which is the half of all companies who want to build and deploy mobile/tab apps or mobile apps to their employees, customers or partners, don't know how and we are going to fill that gap and that's a huge part of Salesforce1..

Your next question comes from Brad Zelnick with Macquarie..

Thank you very much and nice job, guys. Marc, with Keith Block on board, there's an expectation around visibility to drive more quarters like this one, particular by driving large enterprise deals given his background.

Can you talk at all about large deals in this quarter and the large deal pipeline? Also, with all these great things that Keith should be able to deliver, how do you think about the transition risks associated with changes that he is making? Thank you..

Well, there are three things that I have been focused on this year and the three things that are critical for me are that I felt were mission-critical for fiscal year '14, one is Salesforce1, which now I can finally talk about openly and show tomorrow and get everybody on and I think it's an incredible accelerator for this company and really future proves our customers and helps them take that huge investment that they have made in our platform and they thought was kind of glued to PCs and laptops and is running now natively and perfectly in the mobile world.

Number two is, ExactTarget in the Marketing Cloud, we had seen this tremendous demand for marketing technology and we are able to analyze it together and ExactTarget had this monster quarter with us and we are feeling phenomenal about that acquisition. Three is, Keith Block.

We have been after this guy for a long time and the we were very, very fortunate that he became available and he has hired several dozen executives now to come along with them into re-conceptualizing and rebuild our customer facing organization. He is on our board of directors, he is our President and Vice Chairman.

He is doing a phenomenal job and I couldn't be more excited about the having him as part of our Salesforce management team. I mean it's been really a joy and I think he's absolute the best the customer facing executive ever worked within our industry..

Your next question comes from Brent Thill with UBS..

Thanks.

Marc, the reasons Americas and Europe are growing at twice the rate of Asia Pacific, I am just curious, if you could talk through what you are seeing in Asia Pacific? Is there some type of macro overhang or is it execution? How do you think about the gap there that you can close relative to the other geos that you just posted?.

Well, for us Asia Pacific really consists of two countries Australia and Japan. Japan has been a massive country for us and so as Japan goes so does our Asia Pacific revenue. We continue to see great execution in Japan of our organization, but we also see tremendous opportunity that still needs to be fulfilled. I was just in Japan two weeks ago.

I conducted one of our events there, customer company tour, we had 4,000, 5,000, 6,000, 7,000 people there, I don't know how many. It was our biggest event ever in Japan, phenomenal.

What I see is, all the same things I see around the world, which is a phenomenal opportunity for companies to automate themselves in new ways and our ability to grow this Asia Pacific line is really all about our ability to grow Japan. When we look back over the last several years in Japan, it's been tough in the enterprise world there.

Yet we have grown really well. It's been much easier in the SMB world, it's constant flux back and forth. It's about building a full portfolio of customers which we have done. And you are going to see it here at this conference.

We have almost 500 guests who have flown from Japan to attend Dreamforce and I think that when you talk to them, we will have an opportunity to introduce them, I think you are going to see incredible demand opportunities for Japan. Our new Japan data center is now open.

Our new office in Japan is also now open in JP Tower, which the government invited us into one of their buildings in the Marunouchi district, which is traditionally reserved for native Japanese companies.

So they view us very much as a Japanese organization as do we ourselves and I really expect this to be an accelerator for our business there over the next several years..

And your next question comes from David Hilal with FBR...

Great. Thank you. Marc, on your comments on Keith's, can you share with us some of the plans to go up the enterprise and more solution selling. I know you guys talked about verticals, maybe timing on when we might see some specific vertical solutions and just other changes that might help you move even further up the enterprise? Thanks..

That's definitely part of the strategy. He has a comprehensive strategy developed that the board has approved that he's executing. One of the key parts of his strategy is bringing in a new management team, which he has done and that's now in place. Second part of the strategy is to put in critical new programs like a focus on verticals.

And there's other key parts of the strategy as well. I don't want to go through all of it because it is somewhat, I would say, proprietary and competitive and would probably let our competitors know some things that we are going to do which may surprise them..

And your next question comes from Mark Murphy with Piper Jaffray..

Thank you, Marc. I wanted to ask about your potential opportunity to offer Big Data and analytics in the cloud.

Specifically, if you look back on it, most traditional data warehouses are on premise technologies, and so as the applications move to the cloud, do you think that the analytics will follow and also move to the cloud? And if it does, do you think there's a bigger opportunity to be providing analytics for HR data or for customer data or for financial data? So, in other words, maybe the relative size of that opportunity for Workday versus salesforce versus NetSuite and other companies..

Well, number one, we are the largest provider of cloud based analytics and dashboard in the industry. You just have to look at the millions and millions of dashboards that we deliver to our customers each and every day, reports, analytics on their customer data and you are only going to see that expand and become more detailed with Salesforce1.

You are also going to see phenomenal new graphics capabilities directly within Salesforce1 that will let our customers deliver those dashboards and analytics directly to their device. Now to your point, it's not a general purpose analytics and data warehousing solution, though many customers do use it in that way.

Certainly one of my dreams has been to build and deliver a world-class analytics and data warehousing solution with the same type of acuity that salesforce has on CRM, and we have tried that approach quite a few times. We have done a lot of research and development in that area.

We have also bought companies in that area but we have not yet created a product.

When we find kind of the magic secret sauce that we somehow can put together at salesforce where the price and the technology and the ease of use is clearly in order of magnitude better than our competitors, like you are seeing with Salesforce1 today, then we will have that type of solution where we will come to you and say, well, yes, we have a world-class analytics and data warehousing solution.

Today we are 100% focused on sales, service, marketing and platform. Those are the only four markets that we are addressing. And analytics is within those four, but not analytics as a fifth, if that answers your question, specifically..

Your next question comes from Kirk Materne with Evercore..

Hi. Thanks very much and congrats on the quarter. Can you guys just talk a little about Europe? You guys are clearly outperforming than most of your peers in the industry overall. Can you just talk a little bit about what is going on there and some of the efforts you have done in terms of putting in place new sales capacity? Thanks..

Europe's execution over the last several years has been phenomenal and I think perhaps some of the best execution I have ever seen in my career.

We are continuing to work in that area and a lot of that is because we narrowed our focus in Europe, we realized that the key markets in Europe were the U.K., France and Germany and that we needed to double down in those markets and that we were too prevalent in smaller markets that were not material to our organization.

When we made that strategic shift that was led by George Hu, our COO in an analysis that he did that basically yielded our eight country focus around the world which impacted Europe the hardest, we saw this acceleration in Europe and we continue to see great things ahead there and we have talked about that in previous calls that we continue to see world class execution in Europe.

We also saw that same phenomenal execution in North America as well..

Your next question comes from Keith Weiss with Morgan Stanley..

Excellent. Thank you, guys, for taking my follow-up. Maybe just one on the overall (Inaudible).

There has definitely been some mixed signals from some larger legacy vendors out there, how are you guys feeling about just the overall tone of IT spending heading into your fourth quarter, and particularly your ability to get those very largest deals done in your last quarter?.

Well, I don't think we gave out the specific numbers on large deals and all that, but we will probably talk about that next quarter. We had a monster quarter, okay? And, it was a monster quarter in big deals and small deals in the enterprise and SMB in Europe and in the U.S.

and a lot of it has to do with these three kinds of things coming together that I talked about. We have a phenomenal new distribution management team with a phenomenal new acquisition and we have a complete refresh of our whole products family and we are ready and we are excited.

Look, the world has changed it has gone cloud, it's gone social, it's gone mobile and it's gone connected. The companies that are struggling in the market today have not gone cloud, they have not gone social, they have not gone mobile, they have not gone connected. They are still trying to sell the same old stuff.

You could see it in this article that in The Wall Street Journal about Steve Ballmer over the weekend, interview that they had where he basically talks about, well it's time for him to move on because he is too representative of the past. I think for a lot of these companies that quote could be about them. I thought that he articulated it really well.

That there is an old philosophy of computing and those companies that are executing that old philosophy are not growing and they are not competing and they are not succeeding and the companies that have adopted the new capability, they are going to see hundreds of those companies here at this show.

They are growing and we are one of them and I expect good things ahead, because we got the right products that everybody needs right now and a lot of companies don't, so my message to them is the same as before which is the future is cloud computing.

The future is social computing, its mobile computing and it's all about this new connected world or what we call the Internet of customers.

The companies who are aligning with that, I expect will have tremendous success whether they are small, medium or large, but the companies who deny that the world has changed and that they can continue just to sell this old stuff and that people still want it, well, I think that those companies and those CEOs are the ones who are having the problems and they should transform and they should move forward..

Our final question comes from Rick Sherlund with Nomura..

Thanks. Marc, I am curious whether the issues with the NSA has created any concerns on part of customers or prospective customers about multi-tenants and your discussion earlier about HP.

Is this to suggest that you could have a private cloud solution if customers were concerned about having data outside their own firewall or potentially outside their country?.

Well, first of all, the new Salesforce HP Superpod is a Superpod right in our data center with our other pods.

It's just a pod that is dedicated to a specific customer that is willing to spend a significant amount of, what we call, AOV with us or Annualized Operating Value, that is the amount of that customer has to be at a certain threshold before we even consider a Superpod and the Salesforce HP Superpod, the first customer is HP because they have exceeded that threshold.

Now we have other customers who are also exceeding that threshold and this is a phenomenal opportunity for us and these very large customers to align to offer them our multi-tenant software in a dedicated instance. Okay, so this is not as other companies call it, you can't get this on your premise. There's no hybrid.

There's none of this stuff that other people do. This is our same software but in a dedicated instance in our data center and just for you. And it's our same software and those organizations will still have multi-tenants.

So big companies like HP or other companies that use our product, they will still have multiple orbs within one pod, but it will be a Superpod or a dedicated pod. In regards to changes in the marketplace regarding all these news reports and all this stuff, it's not our world. We haven't seen it. We don't participate in it. We don't hear about it.

This isn't an area that we are knowledgeable in. We don't do communications technology or those types of things. We are doing sales forecast and opportunity management and that just isn't part of the world that you have been hearing about. So we feel very much extracted from that..

And we have no further questions. Back to you, John..

Thanks so much. Thanks, Josh, and thanks everyone for joining us today. If you have any follow-up questions, you can e-mail us at investor@salesforce.com and we look forward to seeing many of you tomorrow during our Analyst Day tomorrow morning..

And again, if you want to have a seat in my keynote, I really recommend you get here early. Also I am looking forward to seeing you all. I will be on Mad Money in about four minutes. So I will see you then. Thank you..

Thanks..

Ladies and gentlemen, thank you for your participation. You may now disconnect..