Salesforce reported its second-quarter earnings this week and saw its stock plummet after the results missed analysts' expectations. But what's more important to most customers is the company's strategic direction, and executives gave some insight into that during the earnings conference call. Here are the highlights. (H/T to Seeking Alpha for the transcript.)
All About AI: CEO Marc Benioff already spilled the beans on Salesforce's big announcement for Dreamforce, an AI platform called Einstein. During the call, Benioff went into further depth on Einstein's genesis and what the company will share at the event.
Salesforce has tied together staff and technology from a number of AI-related acquisitions, including RelateIQ, MetaMind and Prediction IO, resulting in a team of 175 data scientists that created Einstein, he said:
When you come to Dreamforce you are going to see how this fits together .... we are going to have some great new products like Sales Cloud Einstein and Service Cloud Einstein, Marketing Cloud Einstein. We are going to have our Analytics Cloud Einstein and many other artificial intelligence capabilities in all of our clouds and our customers will be able to build their own AI capabilities using Einstein extensions and Heroku.
Companies demand that your software is going to be intelligent, smart. ... That that machine intelligence is going to be declarative as well as programmatic. That you are going to leave no customer behind. If a customer is a programmer, they can use it. If a customer is non-programmatic or what we call declarative, they are going to be able to use it.
Benioff went so far as to say Einstein is on par with the likes of IBM's Watson and will ultimately be the best AI platform in the industry.
That said, as is often the case with Salesforce, it's not clear whether Einstein's development remains in an early stage, or whether the company is close to shipping production code. The answer to that should come at Dreamforce in early October.
Those nine-figure deals keep coming: While Salesforce experienced some "softness" toward the end of the quarter in the United States market, it nonetheless managed to land a nine-figure deal with a Fortune 50 company, president Keith Block said on the call.
Salesforce also got a big boost for its recently launched Health Cloud, through an expanded relationship with UnitedHealth. The provider will use Salesforce to "build its next generation of patients and customer engagement for more than 125 million people," Block said.
M&A mania: Salesforce has spent billions of dollars on acquisitions this year—and tried to buy LinkedIn before Microsoft outbid it with a staggering $26.2 billion offer—but as it turns out, M&A wasn't part of its original plan for the fiscal year, Benioff said:
When we came into this year we didn’t really have M&A on our forecast and the reason why is, because when we look at doing M&A we look for really strategic, great companies that are one of a kind, and also that we are going to get a great price.
But once LinkedIn's stock price dropped earlier this year, it became an enticing target, Benioff added. Salesforce was also approached by Demandware and ended up buying it for $2.8 billion, which Benioff characterized as a bargain as well. Most recently, Salesforce picked up Quip for $750 million.
The point of all this M&A is of course growth, and to that end, Benioff said Salesforce is "very close to be able to start talking about our $10 billion year." The question customers may have is how effectively Salesforce can stitch together all of these acquisitions while continuing to go on a shopping spree.
Betting on productivity: Despite Salesforce's close partnership with Microsoft and deep integrations with Office, it now has its own productivity application due to the Quip acquisition.
Productivity is the "fourth leg of the stool" for Salesforce after AI, platform and mobility, Benioff said:
All of our applications need to have core productivity applications, whether it is email, like with Salesforce Inbox or spreadsheets or word processors like Quip ... All of that has to be an integrated part of what we are doing. That’s how I look at where our product line is going and I hope to be able to articulate that in a much simpler, much easier to understand way when we get to Dreamforce.
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