Salesforce.com Inc. is banking on the strong global demand it’s seeing from companies for a “360-degree view of their customer,” CEO Marc Benioff says.
And with the recent expansion of the Salesforce CRM platform to cover business-to-business as well as retail e-commerce, the company is projecting a fiscal second quarter stronger than the $3 billion-plus quarter it just wrapped up.
“Everywhere I go, every CEO wants to talk about ‘digital transformation,’ which begins and ends with the customer,” Benioff, who had just returned from visiting client companies in cities from Tokyo to Minneapolis, said on a Q1 conference call with financial analysts yesterday, according to a transcript from Seeking Alpha.
He went on to say that Salesforce—with its acquisition this spring of CloudCraze, a B2B e-commerce firm whose technology was built on the Salesforce platform—is primed to provide the technology and services that many business-to-business and business-to-consumer companies need to operate with a comprehensive view of both their business and retail customers. “We really see every B2B company and every B2C company becoming a B2B2C company,” he said. “I see that over and over again.”
Benioff pointed to athletic footwear maker Adidas, which has launched its Yeezy 350 sneaker on Commerce Cloud. For many companies like Adidas that to both businesses and consumers, he added, a large share of their sales are to retailers and other businesses. That’s why Salesforce’s acquisition of CloudCraze was “one of the most exciting acquisitions that we did in the quarter,” Benioff said.
The CloudCraze deal complements Salesforce’s 2016 acquisition of Demandware, which now operates as the retail e-commerce part of Commerce Cloud, and the recent $6.5 billion purchase of MuleSoft Inc., a provider of technology for integrating various software systems. With other suites of cloud software for such areas as marketing, customer service and analytics, Salesforce is promoting its technology as a comprehensive platform that companies can use to better interact with customers throughout the product research and buying cycle, Salesforce says.
On the conference call yesterday, Benioff responded to a question about last week’s move by marketing technology provider Adobe Systems Inc. to acquire e-commerce technology company Magento Inc., a provider of e-commerce technology widely used by both B2B and B2C companies. Credit Suisse analyst Brad Zelnick asked Benioff if Salesforce needed to add to its e-commerce platform, and if he expected Salesforce to grow more with B2B or B2C clients.
Benioff said he expected Salesforce to grow along with an increasing need of companies to engage customers in both B2B and B2C markets, and that it was continuing to improve the Salesforce platform with artificial intelligence and other developments. The company’s Einstein artificial intelligence technology and MuleSoft data integration, he and Salesforce president and chief product officer Bret Taylor noted, are designed to compile information from across Salesforce’s sales, service and marketing software applications to help companies better understand and interact with their customers. With Commerce Cloud, Taylor said, companies can already use Einstein to better sort product listings according to their customers’ interests.
Ray Grady, a veteran CloudCraze executive who is now senior vice president and general manager of B2B e-commerce at Salesforce, says being part of Salesforce extends the range of B2B features directly available to CloudCraze clients. Such features include direct integration between CloudCraze self-service e-commerce and the Salesforce configure-price-quote, or CPQ, system that lets companies custom configure and get the price of complex products.
On the conference call with analysts, Salesforce gave a revenue forecast that topped analysts’ estimates, signaling the company’s expensive efforts to expand its software products and customer base may be paying off.
Sales will be as much as $3.23 billion in the current period—which is the second quarter ending July 31—the San Francisco-based company said Tuesday in a statement. Analysts on average projected $3.1 billion, according to data compiled by Bloomberg. The company also raised its full-year revenue forecast. Shares climbed about 4% on the report.
For the first fiscal quarter ended April 30, Salesforce said revenue increased 25% to $3.01 billion. The company has promoted its expanding product portfolio to a bevy of new large and foreign clients in a bid to rival Oracle and Microsoft Corp. Salesforce has also spent rapidly on its international expansion, pledging to invest $2.2 billion in its French business and $2 billion in its Canadian operations over the next five years.
The stock closed Tuesday at $126.88 in New York and has gained 24% this year.
Salesforce expects its MuleSoft acquisition to add $315 million to revenue through the end of the fiscal year, after accounting for its purchase. MuleSoft might help boost profit beyond this fiscal year, though in the current quarter “we’re taking on the cost of the acquisition and integration,” said Keith Block, chief operating officer.
Profit, excluding certain items, was 74 cents a share in the first quarter compared with the average analyst estimate of 45 cents. The company forecast adjusted earnings of 46 cents to 47 cents a share in the current quarter—short of analyst projections of 52 cents.
Billings, or deferred revenue, jumped 25% to $6.2 billion in the quarter ended April 30. That compared with an average estimate of a 12% increase from six analysts surveyed by Bloomberg. Salesforce has stopped releasing future billings projections.
Revenue from the Salesforce Platform, the system that allows companies to build custom applications to track industry-specific workflows, gained 36% to $575 million in the quarter. The marketing and e-commerce business, which rivals Adobe’s Experience Cloud, increased 41% to $422 million. Revenue from Salesforce’s flagship tool for managing customer relationships rose 16% to $965 million.
“The company continues to land larger, multi-cloud deals, which should help support upside to current estimates,’’ Bhavan Suri and Sarah Shizas, analysts at William Blair & Co., wrote in a note before the earnings release. Salesforce has gained traction in health care, financial services and government industries, they added.
Salesforce dominates the market for customer-relationship software. The company had 19.6% of the market in 2017, according to industry research firm IDC. Oracle was No. 2 with 7.1%, and SAP SE had 6.5%. Microsoft and Adobe rounded out the top five.
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