CRM Stock to Move Higher as AI Leads to More Market Penetration
salesforce.com, inc. (NYSE:CRM) remained in the limelight in the second half of last year on account of the company’s potential interest in buying Twitter Inc (NYSE:TWTR).
The year 2017 has begun on a strong note for CRM stock, which has gained almost 22% year-to-date, whereas the broader S&P 500 index has inched up by about six percent. Salesforce CEO Marc Benioff has been pushing the company into artificial intelligence (AI) technology, which has helped the recovery of Salesforce stock.
In September 2016, Salesforce.com had unveiled “Einstein,” a new AI technology for its sales software unit. The technology enables users to predict and personalize software in sales, service, marketing, and other areas.
This week, Salesforce announced that it has entered into a global strategic partnership with International Business Machines Corp. (NYSE:IBM) to deliver joint solutions designed to leverage AI technology and enable companies to make smarter and faster decisions. (Source: “IBM and Salesforce Announce Landmark Global Strategic Partnership,” salesforce.com, inc., March 6, 2017.)
“IBM Watson” is the leading AI platform for business and, when combined with Einstein, will help enhance customer engagement across sales, service, marketing, commerce, and other areas. The new product offerings will help customers better target products and services at customers.
By accessing the broader capabilities of Watson, Salesforce intends to build a stronger position for itself in the market and reach more customers, which is likely to strengthen CRM stock.
IBM CEO Ginni Rometty emphasized the importance of AI and cognitive technologies in every major business decision in the coming years. She added that, this year, IBM Watson is expected to reach one billion people, through everything from oncology and retail to tax preparation and cars.
With this strategic partnership, the power of Watson will help the millions of Salesforce and Einstein users provide an unprecedented understanding of their customers. “I’m thrilled to form an alliance with IBM—no company’s core values are as close to Salesforce’s as IBM’s. It’s the best of both worlds,” said Benioff. (Source: Ibid.)
Salesforce Stock Recovers in 2017
Last year was challenging for Salesforce stock, as investors didn’t like the idea of the company being the potential acquirer of Twitter.
Salesforce.com also kept its acquisition momentum going and bought the startup Krux Digital, LLC in the second half of the year. Krux mines the Internet for data, which then is used by companies to improve their marketing and advertising reach.
The following stock chart shows the movement of CRM stock in the past year, and how it has recovered now.
Chart courtesy of StockCharts.com
Future of Salesforce.com
The integration of Salesforce and IBM AI technology will help customers in a number of ways. For example, a retailer could automatically send highly personalized and localized e-mail campaigns to shoppers by combining local shopping patterns, weather, and retail industry data from Watson with the customer-specific shopping data and preferences from Einstein.
As part of this agreement, IBM will deploy Salesforce’s “Service Cloud” across the company to transform its global product support services. The integration of IBM Watson with Einstein is expected to be available in the second half of 2017.
It was a roller coaster ride for CRM shares in 2016, but Salesforce stock is on a better footing now. Salesforce.com also announced upbeat quarterly earnings last month. The enterprise software company is focused on the goal of achieving $10.0 billion in cloud-computing revenue as it races ahead of its rival Oracle Corporation (NYSE:ORCL).
Benioff has time and time again emphasized the power of AI to help businesses, and he is upbeat about the fact that that the company has been making AI available to millions of Salesforce users with Einstein.
This is also in line with the strategic transformation that IBM has undertaken, with its focus on cloud computing and AI. IBM’s cloud revenue of $13.7 billion, a 35% jump year-over-year, puts it in a strong position in a high-potential market.
The IBM and Salesforce announcement comes in a week in which Alphabet Inc (NASDAQ:GOOG, GOOGL) is hosting its Google Cloud Next ’17 conference. The Internet search giant highlighted the potential of cloud computing and how AI will power the next cloud computing platform.
As most firms look forward to replacing their software with cloud apps, firms like Salesforce.com and IBM could emerge as the big gainers. The move toward offering integrated AI services that offer the learning capabilities of IBM Watson with the sales-oriented technology of Einstein is likely to benefit Salesforce.com.
Benioff knows that the next wave of cloud computing will be powered by AI tools, and he is working in that direction. Meanwhile, CRM stock may appear to be a slow mover right now, but it stands to gain in the long term with enhanced AI technology.