Microsoft and Salesforce.Com Announce Global, Strategic Partnership Conference Call

THOMSON REUTERS STREETEVENTS EDITED TRANSCRIPT CRM - Microsoft and Salesforce.com Announce Global, Strategic Partnership Conference Call

EVENT DATE/TIME: MAY 29, 2014 / 8:45PM GMT

OVERVIEW: A strategic partnership between CRM and Microsoft was announced on 05/29/14.

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©2014 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MAY 29, 2014 / 8:45PM, CRM - Microsoft and Salesforce.com Announce Global, Strategic Partnership Conference Call

CORPORATE PARTICIPANTS John Cummings salesforce.com, inc. - Senior Director IR Marc Benioff salesforce.com, inc. - Chairman, CEO Satya Nadella Microsoft Corporation - CEO

CONFERENCE CALL PARTICIPANTS Brent Thill UBS - Analyst Merv Adrian Gartner, Inc. - Analyst Charles Cooper CNET - Media Doug Henschen InformationWeek - Media Walter Pritchard Citigroup - Analyst

PRESENTATION Operator Good afternoon. My name is Christie and I will be your conference operator today. At this time, I would like to welcome everyone to the Microsoft and salesforce.com partnership briefing conference call. (Operator Instructions).

I will now turn the call over to our host, John Cummings, Senior Director of Investor Relations for salesforce.com. Sir, you may begin your conference.

John Cummings - salesforce.com, inc. - Senior Director IR Thanks, Christie, and good afternoon, everyone. Thanks for joining us for a briefing on the Microsoft/salesforce partnership announced a short while ago.

On the call today is Microsoft CEO Satya Nadella and salesforce.com Chairman and CEO Marc Benioff. Satya and Marc will open the call with a few brief remarks, and then we will open the call for your questions.

During today's call, we may also reference certain unreleased services or features not yet available. We cannot guarantee the future timing or availability of these services or features and recommend that customers listening today make their purchase decisions based on services and features currently available.

In addition, it's possible that some of our comments today may contain forward-looking statements, which are subject to risks, uncertainties, and assumptions, and should any of these risks or uncertainties materialize or should our assumptions prove to be incorrect, actual results could differ materially from these forward-looking statements. And a description of risks, uncertainties, and assumptions and other risk factors that could affect our respective companies' financial results are included in each of our SEC filings included in our most recent reports on forms 10-Q for Microsoft and 10-K for salesforce.com under the heading risk factors.

So with that, let me turn the call over to you, Marc.

Marc Benioff - salesforce.com, inc. - Chairman, CEO Thanks very much, John.

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First, I just want to say how absolutely thrilled I am to be partnering today with Satya. It has been absolutely great working on this agreement together. I just couldn't be happier with how things have gone, so thank you very, very much, Satya, for all your efforts and everything that you're doing to make this so successful.

We both view our mission as helping customers succeed in today's new world, a world of the cloud, a world of social computing, of mobile computing, of connectivity, and this announcement is really about putting our customers first. It is about extending the power of salesforce, the world's number one CRM platform, with Microsoft, the world's most widely used productivity solutions.

And really to get onto the detail, I would like to pass it off to you, Satya, and maybe you can just explain to everyone the details of our new relationship and how all this has come to pass.

Satya Nadella - Microsoft Corporation - CEO Great. Thank you very much, Marc.

First, I want to say it is a pleasure working with you and your team. I couldn't have been more pleased that we are partnering across many areas of our business.

I want to spend some time up front discussing what this partnership means for Microsoft, why we partnered at this time, and what it means for our customers. Those of you on the phone are probably asking why we did this deal. The simple truth is that we wanted to bring more value to our mutual customers and be each other's customers in relevant areas.

More specifically, we're excited to be working together on the following. First, we will empower people to use Office 365 and salesforce seamlessly together, whether it is sharing Office documents in Salesforce1 or analyzing CRM data in Power BI for Office 365. Second, we are bringing the leading CRM application to Windows devices, both phones and PCs. Third, Microsoft has renewed our commitment to using ExactTarget Marketing Cloud, so one-to-one digital marketing efforts, and Marc will talk more about salesforce's commitment to use Microsoft database and cloud technologies with ExactTarget.

This partnership is about helping customers extract more value from our technology. It gives them access to the services they need to be productive to collaborate, market, and sell wherever they work. At Microsoft, we are focused on building the best productivity experiences and cloud platforms and enable our customers to thrive in a mobile first, cloud first world.

I couldn't be more thrilled to make this announcement today with you, Marc, and bring the value to our mutual customers, and with that, let me hand it back to you.

Marc Benioff - salesforce.com, inc. - Chairman, CEO Thank you, Satya, and as I mentioned, I couldn't be happier with this announcement, and your team has really been doing a phenomenal job at Microsoft, and I would like to be so thrilled and appreciative of all the hard work of both teams in fostering the partnership in today's announcement.

Customers need and they want us to work together. They want this partnership. They want this partnership badly. They want to be able to work with Office 365. They want to be able to work with Excel, with Outlook. They want to work with all of Microsoft's apps and they want to be able to work with salesforce. And they want us to work together for our customers' benefit.

Our new native Salesforce1 app for Windows phones is going to give our users the power to run their businesses from their Windows phones. And we see that in the market today. Our customers want to run their business from their phone. I run my business from my phone and I'm going to be running my business from my new Windows phone, and I want to thank you for that, Satya.

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And we're also excited to announce that SQL Server is going to continue to be the database for ExactTarget and that we are increasing our investment and resources on SQL Server, and that salesforce will also use Microsoft Azure for ExactTarget development and testing and also researching other areas where we can use Azure through our Company.

This is an incredible partnership. It starts with Satya and I coming together, our companies coming together, but mostly it is we're getting our customers together. This is also about us extending our use of Microsoft's technologies, like SQL Server and Office 365, and it is also absolutely thrilling for me to hear that Microsoft is going to extend their use of the ExactTarget Marketing Cloud, and what I have seen them do with Office 365 has been amazing.

The strategic partnership with Microsoft fundamentally advances our goal of making our customers more productive and successful, and it is really the best of both worlds. So, I would just like to open this up now for questions.

QUESTIONS AND ANSWERS Operator (Operator Instructions). Brent Thill, UBS.

Brent Thill - UBS - Analyst Past partnerships like this have faded over time. From your perspective, why does this marriage last?

Satya Nadella - Microsoft Corporation - CEO I will take that first, Marc, and then you can add to it. I think Marc said it well when he said that this partnership is about starting with customers first and their expectations. And having two leading SaaS applications, one in productivity and collaboration and the other in CRM, coming together with the integration is what I believe our customers expect of us.

They expect us to work great in a heterogeneous environment, and so that is what is going to make this last. It is about keeping customers first, and then really reinforcing each other's platform capabilities to serve our mutual customers is what I believe is the long-term stable part of this partnership.

Operator Merv Adrian, Gartner.

Merv Adrian - Gartner, Inc. - Analyst That is Gartner, just to be clear. Very interesting announcement, and Satya, I have a question about how this will work for Office 365 users.

There had been prior attempts to link some of these tools to other environments in the app space before, and I think a lot of us probably believe that those things were hamstrung because of the additional cost to connect to those other sources. Do you envision making this available to anybody using Office 365 who is also a salesforce customer, or will there be an additional charge levied on them?

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Satya Nadella - Microsoft Corporation - CEO First of all, one of the things that is fundamentally changing is the cost of integration between different systems, I think, in this cloud first and mobile first world is coming down radically, and it is coming down because of some of the technology advances that we have had across the industry.

And the fact that Office 365 today has great REST-based APIs for anything from SharePoint lists to single sign-on authentication to exchange contact information makes it so much more possible for anyone to have great integrations with Office 365.

So, in terms of cost itself, it is about anyone who is today a subscriber to Office 365 for a business can absolutely take advantage of the integrations that we do between salesforce and Office 365. So, I think that this is going to really remove a lot of the friction that exists and make it much more seamless for them to be able to integrate, because of the modern nature of the integrations themselves.

Operator Charles Cooper, CNET.

Charles Cooper - CNET - Media Marc, you have had sharp criticisms of Microsoft in the past. You have questioned its relevance, as well as its vigor to compete. What has changed, in your opinion?

And if I may also pose a question to Satya, in terms of your strategy going forward, is this the start of more collaborative arrangements with companies that have technologies or functionality where you think Microsoft customers now are not being adequately served? Thank you.

Marc Benioff - salesforce.com, inc. - Chairman, CEO Thanks for that question. I think I should really start with I really believe that relationships are eternal and it is the technology itself that is temporal, and I started working with Microsoft first in the mid-1980s and our relationship, of course, has changed and evolved as the technology has changed and evolved over the decades.

And today, we're announcing a very important interchange between our technologies, and first and foremost, when we acquired ExactTarget, we acquired a stronger relationship with Microsoft. That changed. And when Satya became the CEO of Microsoft, that gave us the opportunity to have an even stronger relationship with Microsoft, and that changed.

And today, we're making another change, and the change that we are making is, first and foremost, we are committing to integrating salesforce more deeply with Microsoft's core strategy, which is Office 365. And that's especially exciting for us because ExactTarget is also embedded within Office 365. Its journey builder capabilities provide users the opportunity to move through Office 365 workflow, and we have been so excited to work with Microsoft in embedding ExactTarget into Office 365.

So, to see them using more ExactTarget within Microsoft is exciting, and that encourages us to use more SQL Server. SQL Server is something that I have watched grow from just an idea at Microsoft to a $6 billion business, and I am sure will be a $10 billion business and one of the very largest and most important database products in our entire industry. And salesforce is more committed to using SQL Server today than ever.

And Azure that Microsoft is investing in its own cloud infrastructure to service is something that we are starting to use more of at salesforce, and we think that Microsoft is doing a lot of the right things to encourage its customers to move to the cloud, to move to the mobile world with some of the advancements in Windows 8, to move to new social computing and connect in a whole new way.

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And those are the things that have changed, and I couldn't be happier. I have always wanted to have a closer relationship with Microsoft and now we do, and it's because all these things have come together. So Satya, do you want to comment on that?

Satya Nadella - Microsoft Corporation - CEO Yes, great, thanks, Marc. I think that Marc really covered the spirit and the depth and breadth, I think, of both what we intend to do and are doing and the changed circumstances that are leading to it.

The only thing I would add specifically to your question is we want to be a broad platform provider in this mobile first, cloud first world, so partnerships like the one that we are talking about with salesforce today is very, very important to us, and we want to have this be mutually reinforcing for our businesses, but most importantly for our mutual customers.

And so, with that spirit in mind, I want to approach partnerships that really add value to the entire industry, and that is, I think, the spirit you can expect more from us.

Operator Doug Henschen, InformationWeek.

Doug Henschen - InformationWeek - Media There have been a number of reports on this deal, but I just want to make sure we get some clarity on exactly what appears on Azure as a platform provider. Is this strictly the integration of the salesforce apps with Office 365, the integration of cloud services, rather than making available salesforce apps on Azure?

Marc Benioff - salesforce.com, inc. - Chairman, CEO That's right. This announcement is not about making salesforce apps available on Azure, though salesforce is going to start using Azure as part of its development environment in how we build software.

This announcement is about taking Microsoft's core strategy, Office 365 and Windows, and integrating it with salesforce's core strategy, our CRM apps, and making a combined offering that offers more value to our users.

So the key is that we are integrating, as step one, the salesforce apps with Office and Windows at a deeper level than was previously available, and we're also continuing to use and expand the use of SQL Server in salesforce's core services, as well as this first step in development on Azure.

Operator Walter Pritchard, Citi.

Walter Pritchard - Citigroup - Analyst Just one quick question for each of you. For Satya, you haven't talked much about your own CRM product here, Dynamics, just wondering if you could give us an update if there is any relevant impact on your sales and strategy around Dynamics CRM.

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And then for Marc, you have done a few acquisitions. You've acquired yourself a few platforms and underlying pieces of infrastructure you have been trying to bring into the Force.com ecosystem. I'm wondering how you [play] off development on Azure versus all the work that you've [had done] to integrating there, and you're adding another platform here. It seems like it's a bit more complexity at a time when you're trying to simplify things.

Satya Nadella - Microsoft Corporation - CEO Thanks, Walter. So today's announcement is about our partnership with salesforce and the many areas of collaboration for us between Office 365, Azure, and SQL Server, and I think us being a great platform provider to salesforce with those three components, and also our use of salesforce technology in ExactTarget for our own use. I think that partnership is what we wanted to talk about today.

There will be some areas that we will compete in, but at the same time, I think as being anyone who has got a broad partnership and a platform approach, you will expect us to do exactly what our customers demand of us on those respects. So Marc, I will just turn it over to you.

Marc Benioff - salesforce.com, inc. - Chairman, CEO I think that's really well said. Satya and I have both been in this industry a long time, and the reason that these relationships work is because Microsoft's core strategy is Windows and Office. That's where the revenue comes from, and salesforce's core strategy is our CRM apps. That's where our revenue comes from, and we both want to grow our revenues, so we know that we need to be investing in our core and in our strategies.

Two, we do have different development environments at salesforce, but those development environments truly are transparent to our users. Today, of course, Heroku is built on AWS, salesforce's core services use its development -- core development centers in our own core data centers, and ExactTarget runs in its own data centers and also in other heterogeneous cloud services. This is an opportunity for us to bring in new services from Azure as appropriate.

Our customers themselves don't necessarily need to know about that. What they need to know is that salesforce's platform is integrated and works well together. I think our Heroku Connect announcement last week was a great example of that, where there is now transparent integration between Heroku and Force.com. You're going to see similar integration between ExactTarget Fuel and Force.com and Heroku.

But in no cases do the customers have to be aware of what is underneath. Those are decisions that we are making. They don't need to know are we using SQL Server, are we using Oracle, are we using something else. They need to know that they are having a great experience in Office 365. They are having a great experience in salesforce. That's what's important.

John Cummings - salesforce.com, inc. - Senior Director IR All right. I think that's all we have for today. Thanks, everyone, for joining us, and if you have any follow-up questions, you can reach out to your usual contacts at either Microsoft or salesforce or those listed on the press release issued earlier today. So thanks, and you may all disconnect.

Operator This concludes today's conference call. You may now disconnect.

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