Global cloud computing behemoth Salesforce.com has been plagued by declining gross margins in the last few years. The gross margin of its cloud software business has contracted every year since 2011, falling from 87% in 2011 to 84% in 2014. Notably, its adjusted EBITDA margin (adjusted for stock-based compensation and amortization of intangible assets) has improved from 15.5% to 16% over the same period. We believe that the decline in Salesforce’s gross margin is due to its heavy investments in new data centers, which is leading to increasingly higher depreciation allocated to its cost of goods sold. This view is underpinned by the fact that Salesforce’s depreciation as a percentage of revenue has steadily increased from 3% in calendar 2008 to 8% in calendar 2014.

from Forbes – Tech http://ift.tt/1N0BusJ
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