David Havlek Marc Benioff - Co-Founder, Chairman and Chief Executive Officer Graham V. Smith - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Thomas Ernst - Deutsche Bank AG, Research Division Adam H. Holt - Morgan Stanley, Research Division Heather Bellini - Goldman Sachs Group Inc., Research Division Brent Thill - UBS Investment Bank, Research Division Kash G. Rangan - BofA Merrill Lynch, Research Division Nathan Schneiderman - Roth Capital Partners, LLC, Research Division Patrick D. Walravens - JMP Securities LLC, Research Division Mark R. Murphy - Piper Jaffray Companies, Research Division Jason Maynard - Wells Fargo Securities, LLC, Research Division Tom Roderick - Stifel, Nicolaus & Co., Inc., Research Division Richard G. Sherlund - Nomura Securities Co. Ltd., Research Division Richard H. Davis - Canaccord Genuity, Research Division Philip Winslow - Crédit Suisse AG, Research Division James Derrick Wood - Susquehanna Financial Group, LLLP, Research Division Steven M. Ashley - Robert W. Baird & Co. Incorporated, Research Division

Good afternoon. My name is Jamaria, and I will be your conference operator today. At this time, I would like to welcome everyone to the salesforce.com Q1 '13 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Mr. David Havlek, Head of Investor Relations. Sir, you may begin your conference.

Thanks, Jamaria, and good afternoon to everyone joining us today to discuss salesforce.com's First Quarter Fiscal Year 2013 Results. The details of our results can be found in a press release issued about an hour ago or in our Form 8-K filed with the SEC. Joining me today, as always, to discuss our first quarter performance, Marc Benioff, Chairman and CEO, as well as Graham Smith, our Chief Financial Officer. In response to your feedback, we've tried to shorten our prepared comments today, leaving more time for your questions. [Operator Instructions] During today's discussion, either in our prepared remarks or in response to your questions, we may offer incremental metrics to provide greater insight into the dynamics of our business or our quarterly results. Please be advised that this additional detail maybe one-time in nature, and we may or may not provide or update these metrics in the future. In addition, please note that 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 earnings press release. And finally, it's possible that we may reference certain unreleased services or features not yet currently available in our discussion today. Because we can't guarantee the future timing or availability of these services or features, we recommend customers make their purchase decisions based on services and features that are currently available. With that, let me make this call official with a brief Safe Harbor. The primary purpose of today's call is to provide you with the information regarding our fiscal first quarter 2013 performance. Some of our discussion or responses to your questions may contain forward-looking statements. These statements 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 of these risks, uncertainties and assumptions as well as other information on potential factors that could affect our financial results are included in our reports filed with the SEC, including our most recent form on Form 10-K, particularly under the heading Risk Factors. To access our press release, our historical results, any of our SEC filings, the webcast replay of today's call or simply to learn more about salesforce, I encourage you to visit our Investor Relations website. With that, let me go ahead and turn the call over to Marc.

Hey, thanks, David. salesforce.com's first quarter was a great start to our fiscal year, absolutely spectacular. And let me just go through some of these highlights of the quarter, just awesome. Revenue for the first quarter was up 38% from a year ago to $695 million. We just couldn't have asked for anything more, and we now have an annual revenue run rate of nearly $2.8 billion. Operating cash flow exceeded $210 million, an increase of more than 50% year-over-year, and that absolutely is our strongest Q1 cash flow ever, 50% year-over-year growth. Deferred revenue more than $1.3 billion, which is up 46% year-over-year, only better by the dollar value of book business, which now, on and off the balance sheet, now tops $4 billion. That's an increase of more than $400 million from the fourth quarter. Now given our strong financial results and the pipeline of new business, we're thrilled to announce today that we are raising our full fiscal 2013 revenue guidance again. And after becoming the first enterprise software company to achieve the $1 billion run rate, the $2 billion run rate, now we're guiding to $3 billion for the year, fiscal year '13. That's an amazing new milestone for our industry. The high end of our guidance keeps us on track to finish the year with a full year revenue growth rate of 32%, and I'm sure everyone recognizes there aren't too many enterprise software companies delivering that to the market for this year. salesforce.com is the fastest-growing software company of its size. salesforce has always been a catalyst and evangelist for change in enterprise software, it's been a promoter of cloud, it's been a promoter of social, it's been a promoter of mobile, and those 3 axes really have defined who we are today. Now…

Thank you, Marc. We are off to an excellent start in fiscal 2013. First quarter results were better than we had expected, with strong execution and continued reduction in our attrition rate. With a goal this year of delivering robust top line revenue growth and improving profitability, we were also pleased to post EPS above our prior guidance. We delivered strong operating cash flow, as Marc mentioned, with first quarter cash flow exceeding $210 million, that's our best Q1 on record. And our pipeline of new business continues to grow, as does deferred revenue and booked business on and off the balance sheet. Given our strong start, we're very pleased to be raising our full year revenue guidance by $50 million, with the high end of our predicted range now at $3 billion. I'll talk more about guidance in a minute, but let me start by highlighting some of the key financial metrics from the quarter. Q1 revenue of $695 million was up 38% over last year. Q1 revenue was actually up 39% year-over-year, excluding the effect of $6 million of FX headwind, and this was our strongest constant currency revenue growth in more than 3 years. Revenue in the first quarter benefited from a continued decline in dollar attrition, which fell for the 11th straight quarter and is now in the low teens on a percentage basis. Dollar attrition is now at its lowest level since we started reporting the number back in the first quarter of fiscal 2010. On a geographic basis, we posted strong year-over-year revenue growth in each of our major regions. Revenue in the Americas grew 43% to $485 million. Revenue in Europe was $118 million, that's up 25% in dollars and 33% in constant currency, and revenue in Asia was $92 million, an increase…

[Operator Instructions] Our first question comes from Tom Ernst with Deutsche Bank.

Marc, I'd like to ask you a question that's kind of in the thread of common questions, I guess, from investors about the balance between the hype in cloud and social versus is it real. So the question I've got for you is if we look at kind of the downfall of some of the last-generation technology like Siebel, it was almost that they were too successful in selling and never got the usage and adoption. As your business is kind of continuously evolving here from a viral adoption to more strategic purchase, how are you changing the organization to make sure that you're connecting with the customer, driving success? And are you actually measuring that success staying high and sustainable?

Well, I think the most exciting thing that's happening this week certainly is the Facebook IPO tomorrow, and there's a couple of exciting things about Facebook. Number one is that we've just never seen an application -- a complex application of this size, this scale with a 1 billion registered users, 1/2 of them will log in every day. And you just have to take a step back and just say, "Wow!" in terms of adoption. And the new user interface models that have been created there like the feed, the status update, profiles, groups, I mean, we've been talking about this now for some time in our various forums. And I'm number one just in all of that. Number two, you just see the level of interactivity between users is really just awe-inspiring, and we've really adopted as fast as we can those user interface models into our own business and then brought them, of course, to the mobile platforms, brought them into the social platforms with Salesforce Chatter and into our core business, which is our Sales Cloud or Service Cloud, our marketing cloud and our social enterprise platform built on Chatter. And you've seen -- if you go to trust.salesforce.com, our transaction volumes have just been really awesome. I mean, you -- we're just anticipating this first billion-transaction day at salesforce.com. You can see days this week that where we've hit 800 million transactions. I mean, that's just awesome. And the question will be, "When we are going to have 1 billion transactions a day?" And I think you probably can see that those are happening faster than ever before at between 210 and 240 milliseconds per transaction. That's usage, that's growth, that's adoption. And that's what we're focused on, and the only reason we're successful at…

Our next question is from Adam Holt with Morgan Stanley.

My question is about the off-balance sheet number. That's an eye-popping number, and obviously, there's a big client that's contributing to that. But can you maybe walk through some of the elements behind that quarter-on-quarter increase and the off-balance sheet number? And how should we be thinking about the seasonality of that number through the duration of the year?

Adam, this is Graham. Yes, of course, the large customer we signed, the largest in our history, the 9-figure deal, was certainly -- helped that backlog number significantly. But we also had some big renewals in the quarter. And when, clearly, we have large customers with large annual order values renewing for multiple years, that's very encouraging to us and really helps add to that backlog number. So we did a great job on renewals this quarter. As you heard, we finally got to a low-teens attrition rate which is great. And I do point out, we still see our average contract length between 12 and 24 months. So it's not like this number is getting moved -- getting skewed or anything like that, so we're still in that 12- to 24-month average contract length. But we're just renewing, we're renewing well, we're renewing often and we're renewing for longer contract periods, and that's just really helping boost that overall backlog number.

Our next question is from Heather Bellini with Goldman Sachs.

This question is for Marc. Marc, I was wondering if you could talk to us a little bit -- I mean, you got the Magic Quadrant for Gartner this quarter for Service Cloud. I'm wondering if you could share with us where you think that market is in terms of kind of tipping into the SaaS' favor? When are we going to start those big rip and replaces from the legacy on-premise deals that were signed, God, over a decade ago? And if you could also just frame for us how big of an opportunity, if you were to characterize that opportunity versus Sales Cloud, if you could give us an idea of how you think that -- how attractive that market is for you.

Well, it's -- I think we've been talking about this now for a few years in terms of how excited we are about Service Cloud and how much we've invested, and it's turned into a massive business for us and far exceeded all of our expectations. I think that the exciting part about Service Cloud has been the growth and the huge transactions that we've signed. We also have created our Service Cloud for small business that we've delivered with Desk.com, and I'm sure you've seen that as well, so we're really not only focused on the very high end of the market, but on the low end as well. And I think when you look at Service Cloud, when you look at Sales Cloud, Sales Cloud, of course, is just a much, much bigger business today, but Service Cloud is growing at a faster rate. So you're just going to see this just incredible tear, that business and we're investing more in Service Cloud than ever. And then we've got our marketing cloud right behind it that we're very excited, and as I said, it's really that Sales Cloud, the Service Cloud and the marketing cloud built on our social enterprise platform that is just awesome, and we're very happy with our strategy. We really do focus, like you mentioned, Sales Cloud the absolute leader in the Magic Quadrant, Service Cloud is the absolute leader, marketing cloud platform, all of these things, are they competitive? Are they winning deals? Are they at the top of their game? And then in our area in cloud, and in many cases, and not just in cloud but it's, as I said, it's #1 in cloud or on-prem. So I'm very excited about service, and I think that it will continue to perform this year in an extraordinary rate.

Our next question is from Brent Thill with UBS.

Marc, there was some concern going into the quarter about some of the sales changes that went on in Q1. I was wondering if you could maybe articulate the changes that were made. And obviously, it didn't seem to have any impact on the current quarter. And I had a quick follow-up for Graham.

Well, we're a fast-growing company. We're the fastest-growing, and that means that our organizational models that were competitive at $1 billion dollars are not the right organizational models at $3 billion. And so we make slight adjustments every year, and those slight adjustments generally take place in the first quarter, this year was no exception. But at the end of the day, it's -- it just sets us up to continue our growth and execution of our business. And we don't go into the nitty-gritty, because it would be kind of pathetic, I think, at some level to kind of like try to tell you how our sales force is organized. But at the end of the day, we're very excited. I mean, we have a tremendous focus on the enterprise, led by Blair Crump, who was a former executive at Verizon, running their enterprise business, and we've got an incredible business, small and medium business being run by Hilarie Koplow. She is doing a fantastic job, and it's this kind of these 2 businesses together that works so unbelievably well, and it's under the auspices of our Vice Chairman, Frank van Veenendaal, who kind of ensures that our core distribution strategy is propelling salesforce.com in the future. And that's kind of how we look at it. And it's very, very -- it's been -- it's a great organization. I couldn't be prouder of them in their success.

Our next question is from Kash Rangan with Merrill Lynch.

Marc, I'm just wondering if you could comment on how trends for new business signings worked out during the month of April. There's been quite a bit of debate. One famous technology company, Nuvali, talked with how their business, not that it's a proxy for your business, but their business progressively weakened as the quarter came to a close. I'm wondering if you can share with us how your pace of new business held up in the month of April. That's it for me.

Well, February, March and April were all very strong months and we have -- that only offset in that -- in March that we had previously discussed with you, we closed our largest business deal -- the largest business deal of all time, which was this massive transaction, but then through the quarter, we saw some great transactions emerge in Europe. We saw some great transactions emerge in Japan, and our U.S. business is also outstanding. So I felt very good about business during the whole quarter, and I think we're, as you can see from these numbers, well set up to deliver an outstanding year, which is why we're raising our guidance now to $3 billion for the year.

Our next question is from Nathan Schneiderman with Roth Capital.

Marc, in past quarters, you've given us metrics on the number of 7-figure deals and the number of 8-figure deals. I'm sure we'd all love to hear that, if you'd be willing to share it this quarter.

I've -- we've talked about that, and we do that on a periodic basis but not on a regular basis, because we just don't want to set the expectation up that on this call, we're going to discuss the specifics of our bookings during the quarter and/or the specifics of the deals. But it's certainly our intention that on a semi-regular basis to tell you exactly how many 7- and 8-digit deals we do. And if you go look back over the last 3 or 4 years, I think we probably do that over 3 or 4 quarters, we show that to you, but we don't plan to do that on a regular and consistent basis. I don't think that that's an appropriate estimation of our business anyway, and I'll tell you why. We're not a company that's based on big deals. Yes, we close big deals. Big deals are exciting. We do a 9-figure deal, an 8-figure deal, a 7-figure deal. But the reality is, is that we do a lot of deals during the quarter, and we do a lot of business in the quarter, and this company has never been able to make this quarter on a big deal, and it makes its business happen on a solid book of business. It's highly distributed between, as I mentioned, small and medium business, product line and an enterprise product line and both of those product lines delivering consistently and effectively across the 7 or 8 countries that we do business in across the world. And that's how we really make our business. I think that if we emphasize the 7- or 8-digit deals to you, it's -- and while, as I said, we will do it on a regular basis, we -- it does not characterize kind of the true nature of our business, which is many, many transactions happening over the quarter, delivering a strengthened portfolio of customers in all markets.

Our next question is from Pat Walravens with JMP Securities.

Marc, do you think the window is closing on the on-premise license model faster than the Oracles and the SAPs of the world expected? And is it happening faster than you expected?

Well, I think that you can look at their license revenue growth over the past couple of quarters, both Oracle and SAP. And I don't think it's anything to write home about. And I think that if you compare that to our growth rate or the growth rate of companies like us in our category cloud companies or even private companies who are in the cloud, companies that have our model, the multi-tenant shared model, I mean, you just -- you can see where the future is. And if you're going to see a software company today, you're not going to start it as an on-premise company. It's just -- it would be unheard of. I mean, I think that really speaks to it. I don't know any venture capitalist that's starting a software company today. So it's not the future. And I think that what is the future is cloud, it's social, it's mobile, and I'm a huge, huge fan of our peers in the public markets and in the private markets as well who have pioneered these models, and I think they represent what the future of our industry looks like, and as you can see with our numbers this quarter, you can do it as a scale that this is what Oracle used to look like.

Our next question is from Mark Murphy with Piper Jaffray.

Marc, when you consider the deal pipeline for the second half of the fiscal year, are you sensing a turning point in your ability to engage specifically at the CIO level in larger and more expansive deployments that are absorbing more of your products up front as a result of this social enterprise positioning?

Well, I think that we have a strong portfolio and a strong pipeline ahead. We are very excited about the pipeline and the opportunity for the fiscal year. And when I look out at those, it's a pretty big mix of customers who have not used us before, but we have a lot of customers that we have relationships with that are expanding and growing and adding -- what we call adding on, and I think it's a good balance of that. Graham, do you want to kind of comment on that?

Yes, I think that's right. You've already talked about the portfolio of different businesses, and certainly, we have some customers where we start with a complete set of solutions and all the different products, but others, for example, some of the transactions in Q4 we saw were just around one product, and then we'll look to expand from there. So I don't think you can really typify it, but certainly, overall, our pipeline growth has been good.

Our next question is from Jason Maynard with Wells Fargo.

Marc, I have a question for you on the competitive positioning. SAP this week at Sapphire was talking about no big upgrade to their core apps for, I guess, 7 or 8 years. And post SuccessFactors, they're going all-in on, I guess, non-integrative, best-of-breed apps in the cloud. And I'm curious to see if you think this will impact customer buying decisions and, frankly, your sales strategy into their installed base.

Well, we're in some of their largest, most important customers in the world, and we're in dialogue with those customers on a regular basis. Some of those customers have become some of our largest and most important customers. And I think SAP does a great job in the back office. They do a great general ledger, and it's on-premise and it works, point-of-sale system, whatever it is for our customers. But in terms of that broad-based social front office, that vision that we've articulated that you've seen now, Jason, at so many Cloudforces and Dreamforce, and you see the fever with the customers and prospects that they want to become social enterprises. And if you watch the Sapphire videos, which I did, I just -- could've happened last year, could've happened 2 years ago, it could've happened 3 years ago. I didn't understand what was new and exciting. And if the new and most newest and exciting thing at SAP is the acquisition of SuccessFactors, well, then God help SAP, because that just isn't that exciting. I mean, that was a sub-$1 billion company that makes a human performance management software that you log into once a year. So where's the action and the vision? I think that they're a great company with a great product line that customers use in their back office, but I think that they have not shown us the future of company and of the industry, and I think it's kind of well represented by what we saw last week. And for us, we're trying to do our best to demonstrate the future of our industry, and that's why major customers like well, I guess, Kimberly-Clark is a great example, who was at Cloudforce in San Francisco, have shown how you can have a great salesforce.com social front office combined with that back office. And if you go to YouTube and you type Kimberly-Clark social enterprise, you'll see the video of their global CIO, Ramon Baez. He's probably the most respected CIO in the SAP ecosystem, used to be the CIO at Honeywell, talking about how this is the perfect fit. It's the best of both worlds. He has had his SAP back office now for a couple of decades, the SAP mainframe that's in the closet, and then they've got all their next-generation applications and systems being in salesforce. That sounds great to me.

Our next question is from Tom Roderick with Stifel, Nicolaus. Tom Roderick - Stifel, Nicolaus & Co., Inc., Research Division: So Graham, I wanted to try on this deferred revenue issue, just make sure I get a little bit more clarity here and also thinking about sort of the pace of deferred as we go through the year. But can you just clarify what the total impact from sort of the invoicing changes and the longer-term changes were to Q4? And then into Q1, just trying to get an apples-to-apples compare on that and then how we think about Q2. And then I -- so understand where you're kind of guiding to. I was thinking about deferred revenue in Q2. As we think about the rest of the year, Q3 was sort of down sequentially. Is that kind of the right pattern to think about as the model out the rest of the year and then a big ramp into Q4?

Yes, I mean, so this is -- as I say, there's a lot of moving parts in this number. If you remember, when we talked about Q4, we had overall coming out of Q4 net benefit on DR just around $150 million to total deferred, and that was split roughly between 2 items: one was the change in annual invoicing discipline, and the second was the multiyear invoice that you can see also showing up in long-term deferred. So if you sort of roll that forward to Q1, the net benefit actually is slightly less, because, as I mentioned earlier, what we do when we accelerate the invoicing to annual is you actually create a headwind for DR the next quarter. So roughly $150 million benefit at the end of Q4, roughly $140 million net benefit at the end of Q1. So that's why when we talk about the guide for Q2, we say -- but the actual total that we'll report will be roughly flat, but if you -- we expect when you back out the net sort of cumulative benefit on DR of these changes, it will actually be slightly up. And that's kind of the trend we've seen over the last couple of years with DR moving from Q1 to Q2.

Our next question is from Rick Sherlund with Nomura Securities.

Graham, I'm kind of struggling as well with the adjustments for the effect of the changing terms. If I adjust last quarter and this quarter, do I end up with actually faster or, let's call it organic growth sort of after the adjustments? Though, I think I'm coming up with about 36% growth in billings as adjusted versus the 34% reported number. But I'm still playing with the math. Any -- am I doing it the right way?

Yes, I think you're thinking -- I mean obviously, Rick, we don't talk about billings, because for all the reasons we've said in the past, we don't think it's a particularly accurate representation of what's happened in the quarter. But if you want to do that calculation, basically yes, it adds a little to the 34%, I think, that you would calculate normally on the balance sheet accounts. It adds a 1 or 2 points to that number for that calculation.

That's terrific. I was braced for a lower number, but when I realized I got to adjust last quarter as well, I realized, well, actually, year over quarter, looking at from last quarter, it actually -- actually, I think it helps you little bit. All right, so that's a relief. Marc, I was -- I think I might have missed a little bit on your response to the earlier question about Cisco's comments. There was also a lot of speculation about your enterprise business being slower, and then Chambers made his comments, and you guys obviously had a terrific quarter. Have you noticed any change in your enterprise? Was the mix different in the quarter? Was enterprise slower? Any indication -- read across to what's happening in the broader economies?

For us, I think that we at a fundamental level believe that we're still very much a distribution-constrained organization and we're just trying to hire as many salespeople as we can around the world and get them properly organized and in their seats and trained and able to deliver on the opportunity. And it's not that the overall economy can't affect us. We saw when the whole world imploded, it did slightly impact us but probably not as much as everybody else, because when you have this level of growth and differentiation from the competitors, our greatest challenge is just the ability to close the business. And that's honestly what we're focused on when we look at these pipelines. Obviously, by the nature of our business, when we look at the second quarter pipeline, it's unlike anything we've ever seen in size and scale. And then the challenge is how we're going to close it and wrap it up, because there's only so many of us. And that's how kind of how we look at the business, and we don't really take into consideration these kind of things that we're hearing about. And I've got the highest, highest respect for John Chambers and Cisco, but I -- their business in pushing out switches is not directly related to our ability to close Sales Cloud, Service Cloud, marketing cloud and platform transactions and help our customers define their social enterprises. Our customers are trying to grow their top lines, and that's what we are. We're a top line company. We're a company that helps our customers close more business, and that's all we're focused on every day is our customer's success in closing those deals. And that pipeline is rich and deep, and we want to just mine it, and that's…

Our next question is from Richard Davis with Canaccord.

Marc, how do you think about making your franchise in the developer world, specifically Force, as good as you have kind of at the application layer? And I realize the 2 are interlinked, but do you think of those separately? Or do you get people really playing on the test dev side of that equation?

Yes. Well, I think it's a multidimensional problem, and for us, we've got developers who are inside our existing customers, and those are core developers, and they love things like Force.com. You've got ISVs, who are building applications on Force.com, like companies that you've maybe read about in the Wall Street Journal, Canaan D [ph], which is building manufacturing on Force.com; or FinancialForce that's building the ERP solution; or BMC Software building revenue force and others. And then you've got, in addition to those ISVs, you've got kind of independent developers who are building on Force, but they're also building on our Heroku platform, and Facebook developers, of course, can access that Heroku platform right from inside Facebook, which is awesome and has created a lot of growth in the application number. And then you have developers who are building applications for websites and for interactive capabilities also on Heroku. So it's not one developer, it's many different developers, and our developer numbers are at record levels. And we're speaking, I think, with a competitive product for developers in a way that we've never been able to do before. We've just really been able to really beef it up since our acquisition of Heroku. It's really -- that really changed the tone in our ability and you saw that in our Cloudstock program at the Cloudforce, where we had a whole developer Pavilion. So we are very focused on the developer, but we are focused on the developer as part of our overall strategy, and it's one of 4 critical legs of our stool to make that happen, which is the social enterprise platform this quarter but so is sales, service and marketing as well.

Our next question is from Phil Winslow with Credit Suisse. Philip Winslow - Crédit Suisse AG, Research Division: One of the things we -- you were talking about earlier, obviously, was the marketing cloud. Marc, just wondering as you kind of envision the future how you sort of see the marketing cloud evolving, both from a B2B and a B2C perspective.

Well, I've spent a lot of my time thinking about that question this quarter, because I'm sure, like you have, I have been reading a lot of stories about Chief Marketing Officers who are spending more on technology than ever before. That is a common story today. And I think an increasingly common story is that the CMO is going to spend more on technology in a company than the CIO. And that has not happened yet in most companies, but I believe that it will. And that is a whole new opportunity emerging, and we need to double and triple down internally at salesforce on creating that marketing cloud. We were very fortunate about a year ago to buy the #1 marketing company with Radian6, doing social listening. And we're really looking at what are all the things that we need to develop to deliver that marketing cloud. And I am really excited about the marketing cloud. I really think it is a multibillion-dollar opportunity just as we've seen the Sales Cloud is and the Service Cloud is and the platform is. So I'm trying to get my thinking around that, and by the time we get to Dreamforce, I think now we'll have a lot to talk about in regards to the marketing cloud. And you can already see a couple of strong tenets of that, and I just mentioned a few of those to you. We've got, of course, Radian6, which is doing amazing. We've got Heroku, which lets you build interactive applications for Facebook or for the Web. We've got Site.com that we introduced at Cloudforce San Francisco, which is -- lets you deliver your website. And we've also have Data.com, which is the critical data that marketers need to be able to figure out who their customers are and get key marketing materials and information to them. So that is the core of the marketing cloud today. Radian6, Heroku, Site.com and Data.com. And then the question is for us how do we build a full marketing suite? How do we become the marketing desktop? How do we have the marketing front office? And we're looking at that, and I think that's a very, very exciting opportunity. And I -- and then just like Heather was talking about how exciting Service Cloud is, she's absolutely right and it's stellar. And, of course, I've been talking about Sales Cloud for 13 years, and now you're going to hear me talk a lot about the marketing cloud, I think, over the next decade.

All right. We're down to the final stretch, so maybe 1 or 2 more questions.

Our next question is from Derrick Wood with Susquehanna International.

Graham, I was wondering, the $140 million number you gave. Does that include the impact from the 9-figure deal? And if not, could you give us what came on the balance sheet from that? And then I guess for Marc, back to kind of the macro question, if you were to see some budgets come under pressure, are there proof points that you can look at past deal flow that has helped that accelerate -- helped accelerate decision-making to move off of on-premise and over to cloud given the ROI?

So Derrick, the $150 million and the $140 million numbers for Q4 and Q1 don't include the invoicing impact of the 9-figure deal, because that's a normal deal. Those 2 numbers we've given for Q4 and Q1 are changes that we want to call out, either because it's a multiyear invoice or because it's a change in sort of invoicing, either from quarterly or semiannual to annual. So the 9-figure deal was just a normal annual deal, and so it's not included in those numbers.

Yes, I'll tell you that in today's world, and the world has changed, and we're going to see that tomorrow with the Facebook IPO, that it's a social world and it's a mobile world and it's a cloud world, and social, mobile and cloud have really been defined by Facebook. That's what Facebook is today, and that's what we're trying to be at salesforce, but we're trying to deliver it through our Sales Cloud and Service Cloud and marketing cloud and platform. If you haven't redefined your company at this point around those pieces, you're probably grasping for straws in your strategy. We saw that yesterday at Sapphire, and we've seen that with other competitors as well, where they're just trying to sell the past to the future, and the past does not equal the future. And by the time we get to Dreamforce and you see the power of our customer base, 100,000 attendees attending Dreamforce this year in September. When you see major CEOs show up and say they're using salesforce.com, like Jeff Immelt at General Electric, and you hear that the incredible stories of success of these customers, you're going to see the world has changed, and this isn't just about cloud. This has been a fundamental transformation of our customers themselves and users, and I'm sure everyone on this call is looking at their iPhone or their iPad or their Android device or some other mobile technology, and maybe they've got Twitter or Facebook in front of them. And we just didn't have that 4 or 5 years ago. And yesterday, I re-watched Steve Jobs rolling out the iPhone in 2007, and it just inspired me that the world can change so fast, that so many exciting things are happening, and now you do have these great new prophets emerging, like Mark Zuckerberg and Jack Dorsey, and our job is just to listen and follow them, because I think the enterprise is going to get pulled into the future through these consumer services. And that's what salesforce.com is going to help our customers do. All right. I'm getting some tired stares here, so we're going to take one last question. Let's bring it home strong.

Our last question is from Steve Ashley with Robert W. Baird. Steven M. Ashley - Robert W. Baird & Co. Incorporated, Research Division: Actually, you pointed out that large deals aren't your whole business, you make a lot of it on base hits. And I just want to talk about maybe the small and midsized business, how you continue to see that represent the same kind of percentage of your business. And then also Desk.com, Concur Force, some of the initiatives you've talked about in the past of bringing to that market. Are you having any success selling into that small and midsized markets with those products?

Well, Desk.com and Do.com are phenomenons. And with Do.com, we have now more than 100,000 customers on there who've created more than 1 million tasks, which is amazing. We've just never seen any kind of growth like that before, and that's very much a future for salesforce. It's not where our revenue is today, but we look at that almost like our skunk-works, our R&D center. And these new companies that we bought, that we're nurturing along and that we honor and respect, because hey, we respect the future at salesforce, and what we see at companies like that is what we have to become in the mainstream. And we look at those as beacons of the future. And if you're not using Do.com, you should be. I mean, it is something that I use every day, it's phenomenal. And for small and medium business, Desk.com is awesome. And we've also talked about all the other great services of salesforce. Even great capabilities like we have, like our Database.com service, letting customers roll out their databases, our Site.com for websites and, of course, Salesforce Chatter, and you can see that at Chatter.com where you can sign up and just get going, and we've seen so many customers there, and we have these massive customer implementations now with Chatter. We didn't have time to talk about that in deep depth on the call, but I was just reviewing that with the head of our Chatter unit, and the size and scale of the Chatter deployments are as large as they've ever been. So a lot of exciting oars in the water and working to get to that $10 billion business in the era of Facebook and Twitter, that we are paying attention to these next-generation companies, and we are working hard to build those concepts into who we are as a company so we can deliver that in the mainstream of the enterprise.

All right. I think that wraps things up. Before we sign off here, I want to encourage everyone to attend our upcoming Cloudforce London event. As Marc indicated, that's next Tuesday, May 22 at the ExCeL Center in London. The event is going to be hosted by cofounder Parker Harris as well as our Chief Operating Officer, George Hu; and this is an event you absolutely won't want to miss. We already have more than 12,000 customers registered. You can go ahead and register, as Marc said, at Dreamforce.com, or you can go ahead and just send me an email. We'll make sure to get you in. We look forward to seeing everybody there. Thank you for joining us today, and we'll look forward to catching up with you soon. Bye-bye now.

Ladies and gentlemen, thank you for your participation in today's conference call. You may now disconnect.