Salesforce.com (CRM) Getting Crushed as Reality Hits

Shares of Salesforce.com (NYSE:CRM) is getting hammered today, and is the worst-performing stock on the S&P 500, as the stock is down over 6 percent after running up well over 90 percent in the last 12 months.

This could be a simple pullback or the result of a closer look be investors at the company, as there are a number of questions as to its spending habits are starting to raise some eyebrows.

The Wall Street Journal recently reported:

"This is so often a problem for fast-growing companies, and Wall Street too often turns a blind eye until it is too late. Is it happening again?

"Salesforce's sales grew 29% last quarter, but its total operating expenses soared 40% to $365 million. As a result it actually booked a loss – of $391,000 – from operations. Even for the full year, sales rose 28% but costs rose faster, with the result that operating income actually fell by 15%. The company made a mere $97 million at the operating level out of $1.55 billion in sales.

"Where's the money going? So many places. It's hiring new staff aggressively, including around 500 just last quarter. It's paying sales staff huge commissions, plus big incentives including in stock. It is making "aggressive" acquisitions, by Mr. Benioff's own description, and spending freely on infrastructure too.

"Like real estate. The company needed new headquarters to house its growing staff. Most mere mortals would rent a bigger office. But that's so Old Economy. Instead, on Nov. 1 – the day after the end of last quarter – Salesforce spent $278 million cash buying 14 acres of land in San Francisco in order to build a new "campus."

"That doesn't even include the cost of building the offices. It's just the land."

And taking into consideration management has been selling off a lot of their stock, "especially true of CEO Mark Benioff. Admittedly, they have been doing this for several years. But according to InsiderScore, Benioff alone sold $220 million worth of stock in the past year," it could be that it may be time to take a little more sober view of salesforce.com and not get so caught up in drinking the kool aid.

Salesforce.com was trading at $130.00, down $8.83, or 6.36 percent, as of 1:41 PM EST.