1108524--3/15/2006--SALESFORCE_COM

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RISK FACTORS WHICH MAY IMPACT FUTURE OPERATING RESULTS Risks Related to Our Business and Industry If our on-demand application service is not widely accepted, our operating results will be harmed. Defects or disruptions in our service could diminish demand for our service and subject us to substantial liability. Interruptions or delays in service from our third-party Web hosting facilities could impair the delivery of our service and harm our business. We rely on third-party computer hardware and software that may be difficult to replace or which could cause errors or failures of our service. If our security measures are breached and unauthorized access is obtained to a customer s data, our service may be perceived as not being secure, customers may curtail or stop using our service and we may incur significant liabilities. The market in which we participate is intensely competitive, and if we do not compete effectively, our operating results could be harmed. If we experience significant fluctuations in our operating results and rate of growth and fail to balance our expenses with our revenue and earnings expectations, our results would be harmed and our stock price may fall rapidly and without advance notice. Our quarterly results can fluctuate and if we fail to meet the expectations of analysts or investors, our stock price and the value of your investment could decline substantially. We have incurred significant operating losses in the past and may incur significant operating losses in the future. Because we recognize revenue from subscriptions for our service over the term of the subscription, downturns or upturns in sales may not be immediately reflected in our operating results. The market for our technology delivery model and on-demand application services is immature and volatile, and if it does not develop or develops more slowly than we expect, our business will be harmed. We do not have an adequate history with our subscription model to predict the rate of customer subscription renewals and the impact these renewal rates will have on our future revenue or operating results. Our growth could strain our personnel resources and infrastructure, and if we are unable to implement appropriate controls and procedures to manage our growth, we may not be able to successfully implement our business plan. We derive a significant portion of our revenue from small businesses, which have a greater rate of attrition and non-renewal than medium-sized and large enterprise customers. Our limited operating history may impede acceptance of our service by medium-sized and large customers. As more of our sales efforts are targeted at larger enterprise customers, our sales cycle may become more time-consuming and expensive, we may encounter pricing pressure and implementation challenges, and we may have to delay revenue recognition on these customers, all of which could harm our business. If we are not able to develop enhancements and new features to our existing service or acceptable new services that keep pace with technological developments, our business will be harmed. Any efforts we may make in the future to expand our service beyond the CRM market may not succeed. If we acquire any companies or technologies in the future, they could prove difficult to integrate, disrupt our business, dilute stockholder value and adversely affect our operating results and the value of our common stock. If we fail to develop our brand cost-effectively, our business may suffer. Failure to adequately expand our direct sales force and develop and expand our indirect sales channel will impede our growth. Sales to customers outside the United States expose us to risks inherent in international sales. Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and our brand. We may be sued by third parties for alleged infringement of their proprietary rights. We may be required to purchase the interest in our Japanese joint venture held by our joint venture partner, under certain circumstances, on terms that may not be favorable to us. Evolving regulation of the Internet may affect us adversely. Privacy concerns and laws or other domestic or foreign regulations may reduce the effectiveness of our solution and adversely affect our business. Our business is subject to changing regulations regarding corporate governance and public disclosure that have increased both our costs and the risk of noncompliance. We are dependent on our management team and development and operations personnel, and the loss of one or more key employees or groups could harm our business and prevent us from implementing our business plan in a timely manner. Because competition for our target employees is intense, we may not be able to attract and retain the highly skilled employees we need to support our planned growth. We might require additional capital to support business growth, and this capital might not be available. Changes in the accounting treatment of stock options will adversely affect our reported results of operations. Unanticipated changes in our effective tax rate could adversely affect our future results. Risks Related to Ownership of Our Common Stock The trading price of our common stock is likely to be volatile and could subject us to litigation. If securities analysts stop publishing research or reports about us or our business or if they downgrade our stock, the price of our stock could decline. The concentration of our capital stock ownership with insiders will likely limit your ability to influence corporate matters. Provisions in our amended and restated certificate of incorporation and bylaws and Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our common stock.

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1108524--3/15/2006--SALESFORCE_COM_INC