Tech Stocks: Salesforce surge highlights tech action

SAN FRANCISCO (MarketWatch) � Salesforce.com led a day of gains across the technology sector, as the company�s results won rave reviews on Wall Street.

/quotes/zigman/338061/quotes/nls/crm CRM 135.75, -6.67, -4.68% /quotes/zigman/68270/quotes/nls/aapl AAPL 605.88, -4.06, -0.67% /quotes/zigman/3870025 SPX 1,354.68, -12.90, -0.94%

Salesforce.com CRM �closed the day up 9% to $143.64. The stock has risen more than 40% since the beginning of the year, outpacing Wall Street favorite Apple Inc.,�which has gained 29% year-to-date.

Apple AAPL shares closed up 1.2% at $522.41. The company has agreed to buy mobile software applications company Chomp Inc. for about $50 million, according to media reports.

Salesforce.com�s financials highlighted optimism about the future of the software-as-a-service market in which companies offer business applications as a Web-based service, allowing companies to slash IT costs. This was evident Friday as shares of Salesforce rival NetSuite Inc. N jumped more than 5% by the close to $49.47.

Salesforce reported an adjusted profit of 43 cents a share, on revenue of $632 million, topping Wall Street expectations for a profit of 40 cents a share and sales of $624 million. But what truly wowed analysts was the company�s 57% billings growth.

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�Good heavens!� JMP Securities analyst Patrick Walravens said in an email. �I think it�s fair to say it�s historically significant for the software industry.�

In a note, he said, �While the software-as-a-service trend has been growing rapidly since 2005, it is now exploding as major enterprises are accelerating their adoption of cloud computing.�

Cloud computing is the new IT model in which businesses, instead of spending loads of money on running their own data centers, access IT needs through a network. Customers typically pay a fee based on the number of users for access to applications used for such tasks as managing a company�s finances to keeping track of inventory.

The trend is catching on fast.

In a call with analysts on Thursday, Salesforce Chief Executive Marc Benioff said the company �signed more than 100 seven-figure transactions and nine eight-figure transactions in the quarter.� Among the customers he mentioned were Hewlett-Packard Co. HPQ �, Time Warner Cable, Nvidia Corp. NVDA � and Activision Blizzard Inc. ATVI �

Not all analysts were impressed, however.

Cowen analysts Peter Goldmacher and Joe Del Callar maintained an underperform rating on Salesforce, arguing that the company�s billings growth was �artificially inflated� by a couple of factors, including the impact of the company�s shift to an annual billing system from a mainly quarterly system.

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�Looking at deferred [revenue] on an apples to apples comparison, we believe that sales force productivity likely declined again this quarter,� they wrote.

In an interview, Del Callar said, �It�s a solid quarter. It�s just not a blowout quarter. And valuation is still high.�

In December, Cowen downgraded Salesforce, pointing to the growing competitive threat from bigger software companies led by Oracle Corp. ORCL �and Microsoft Corp.MSFT �

Traditional software companies have made money by licensing their products to businesses. But Oracle has been aggressively building up its software-as-a-service capabilities.

Oracle shares were up 1.5% Friday, giving the broader sector a lift, as the Nasdaq Composite Index COMP �edged higher by 0.2% to 2,964. Gains also came from Dell Inc.DELL �, Google Inc. GOOG �and Advanced Micro Devices. AMD �

On the downside, shares of Marvell Technology MRVL �were down 3.7% after the chip company posted a drop in profit. Also in the red were shares of Hewlett-Packard HPQ IBM