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Salesforce Preparing To Introduce Einstein -- An Artificially Intelligent CRM Platform

CEO Marc Benioff discusses the upcoming AI platform, and his latest acquisitions, in a second-quarter fiscal 2017 earnings call that beat expectations but offered a lower third-quarter guidance than investors were expecting.

Salesforce will demonstrate a first-of-its-kind artificially intelligent CRM platform -- an offering that combines several technologies acquired in recent years -- at its upcoming Dreamforce conference, CEO Marc Benioff told investors Wednesday.

While reporting financials for the second quarter of fiscal 2017, Benioff devoted much of the earnings call to pre-publicity for the upcoming Einstein platform that will infuse cognition into customer relationship management tools across Salesforce clouds. He also shared inside details about two acquisitions that happened in the quarter, and one that didn't — the failed bid for LinkedIn.

While Einstein delivered the wow effect, the financial outlook presented by Salesforce leaders disappointed Wall Street, and Salesforce stock slid in after-hours trading by roughly 8 percent. Shares were trading just above $74 at press time.

[Related: How Salesforce Convinced The Channel That No Software Licensing Margins Are No Problem]

Salesforce actually beat investor expectations for the quarter ending July 31, with revenue up 25 percent from the same quarter last year to $2.04 billion — delivering non-GAAP earnings per share of 24 cents.

But the beat was tempered by a weak close to the quarter in North America, and guidance for the third quarter of between $2.11 billion and $2.12 billion that was below what investors were anticipating.

The Einstein platform will be a major game-changer, according to Benioff.

Artifical intelligence is the "next wave of our industry," he said, and Salesforce has deployed a machine learning team of more than 175 data scientists building out its platform.

Einstein's capabilities will be applied to the sales, service, marketing and analytics clouds, the CEO said.

Salesforce's take on machine intelligence will be both programmatic and declarative, Benioff said, meaning software developers will be able to leverage the platform, but so will users with no programming skills whatsoever.

That wide accessibility will make Einstein the best artificial intelligence platform in the industry, Benioff said. And customers will be able to build their own AI applications through Einstein extensions and the Heroku development platform.


Einstein will be "on par and as capable as any other platform" in the industry, including IBM's Watson, Benioff told investors,

The soon-to-be-released AI technology "puts us well ahead of CRM competition again," he said.

Benioff listed several prior acquisitions that paved the way for Einstein: RelateIQ, MetaMind, Implisit, PredictionIO and Tempo.

But he told investors the company started its current fiscal year absent the intention of buying more companies.

Some "pretty big changes in the market" overrode that plan, he said.

The first was LinkedIn having a bad quarter that saw the professional social network vendor's stock plummet. That made a "unique strategic asset" available "for a great price."

Salesforce put in a bid, but ultimately lost out to a higher offer from Microsoft, Benioff said.

Soon after, a similar situation appeared, with "a company we coveted for many years" on the market. Benioff made a pitch to his board to buy e-commerce giant Demandware.

While many enterprise software companies are aspiring to achieve billion-dollar run rates on a single product, Salesforce has three, Benioff said. Demandware, soon to be the Salesforce Commerce Cloud, will become the company's fourth billion-dollar cloud, he said.

Later in the summer, Benioff got a call from his friend Bret Taylor, former CTO of Facebook and a pioneer in the development of Google Maps.


That discussion led to the acquisition of Taylor's new venture, Quip, developer of a popular word-processing app for mobile devices, as well as Taylor's employment at Salesforce.

A "dream this company has had for several years" was to bring Taylor on in a technological leadership role, Benioff added.

So a fiscal year that began with no acquisition ambitions ended at the halfway mark with two very significant ones.

"Some of these acquisitions are helping us build out our CRM today; others are laying the foundation for our future," Benioff said.

Those acquired technologies will be prominently featured at the upcoming Dreamforce, an event that will offer "a rush of innovation" by revealing more new products than ever before at the annual conference, the CEO said.

Keith Block, Salesforce's president and COO, credited Salesforce partners, both ISVs and global systems integrators, for many of the company's big wins in the last quarter. That ecosystem continues to expand, Block said.

As to the disappointing end to the quarter, Block said Salesforce has made adjustments, "made adjustments, looked at playbooks" and "tightened up on a few things" regarding its operations.

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