Good day. My name is Carmen, and I will be your conference operator today. At this time, I would like to welcome everyone to the Salesforce Demandware Acquisition conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press the pound key. I would now like to turn the call over to Mr. John Cummings. Sir, the floor is yours.
Thanks so much, Carmen. Good morning, everyone. Earlier this morning, Salesforce announced it has entered into an agreement to acquire Demandware. The details of this transaction can be found in a press release issued approximately 7:00 A.M. Eastern Time this morning. Joining me today to discuss the transaction are Keith Block, Vice Chairman, President, and COO, Mark Hawkins, Chief Financial Officer, Parker Harris, Co-founder, Alex Dayon, Chief Product Officer, and Tom Ebling, CEO of Demandware. The purpose of today's call is to discuss the acquisition of Demandware. Keith and Mark will review the proposed acquisition and the terms of the transaction, including the estimated impact on our fiscal second quarter and full-year fiscal 2017 guidance, which we gave in our most recent results call in May. After our prepared remarks, we'll turn the call over to your questions.
You should be aware that our discussion and responses to your questions may contain forward-looking statements related to the acquisition of Demandware and estimated results of the company, which are subject to risks, uncertainty, and assumptions. All statements other than historical facts included in our discussion, including but not limited to statements regarding the timing and closing of the transaction, the expected benefits and financial impact of the transaction, expected performance and future business plans, and any assumptions underlying any of the foregoing are forward-looking statements. Should any of these risks or uncertainties materialize, or should our assumptions prove to be incorrect, actual company results and actual effects of the transaction could differ materially from these forward-looking statements.
A discussion of risks, uncertainties, and assumptions related to the acquisition and the estimated impact to the company, as well as other information on potential risk factors that could affect our financial results, are included in reports filed by Salesforce and Demandware with the SEC, including each company's reports on Forms 8-K, 10-Q, 10-K, particularly under the heading Risk Factors and the Tender Offer Statement on Schedule TO and other offer documents to be filed by Salesforce, as well as the Solicitation Recommendation Statement on Schedule 14D-9 to be filed by Demandware. Please be aware that any unreleased services or features referenced in today's discussion or other public statements are not yet available and may be not be delivered on time or at all. Customers who purchase our services should make these decisions based on features that are currently available.
Finally, the intended acquisition of Demandware includes a tender offer made by Salesforce and a subsidiary. The tender offer has not yet commenced. The discussion regarding the acquisition is for informational purposes only and is neither an offer to purchase nor a solicitation of an offer to sell any securities. When the tender offer commences, Salesforce will file a tender offer statement on Schedule TO with the SEC, and Demandware will file a solicitation recommendation statement on Schedule 14D-9 with the SEC regarding the tender offer.
Demandware stockholders and other investors are strongly advised to read the tender offer materials, including the offer to purchase and related letter of transmittal and certain other tender offer documents that have yet to be filed and the solicitation recommendation statement when they become available, as they will contain important information that should be read carefully before any decision is made with respect to the tender offer. The tender offer statement and the solicitation recommendation statement will be available for free at the SEC's website, www.sec.gov. Free copies of these materials and other tender offer documents will also be made available by the information agent for the tender offer. With all that, let me turn things over to you, Keith.
Thanks, John. Good morning, everybody. Before I begin, I wanted to let you know that Mark will not be on today's call because he had a prior commitment to appear on CBS this morning. We can all enjoy that today as well. This is a historic day for Salesforce and for our customers. We couldn't be more excited to talk to you this morning about our agreement to acquire Demandware. This announcement is particularly exciting because it signifies Salesforce's entry into the digital commerce market. Not only will this extend our CRM leadership, the acquisition of Demandware positions us to capture this multibillion-dollar commerce market with a recognized leader in the space. Today, our customers are connecting with their customers in entirely new ways across sales and service and marketing and communities and analytics and IoT and our platform.
Now, with the addition of Demandware's industry-leading commerce capabilities, we're in a unique position to extend our CRM leadership with the new Salesforce Commerce Cloud. Our customers have been increasingly asking for this. It's coming up in many conversations. Every company sells, services, markets, and every company is looking for world-class digital commerce capabilities. They're looking for new ways to bring these processes together so they can engage with their customers in entirely new ways. No one in the world can do that but Salesforce. That's why companies of all sizes are coming to Salesforce to help them with their digital transformation, which is why this makes so much sense for our customers. Now, digital commerce will soon be an $8 billion industry.
With Demandware, we'll be well-positioned to deliver the future of commerce and lead the multibillion-dollar commerce market and create yet another billion-dollar cloud for Salesforce. We believe this will be another future growth lever for our business as we look to grow to $10 billion, $20 billion, and beyond. With that, I'd like to hand it over to our Chief Product Officer, Alex Dayon, for his comments.
Well, thank you, Keith.
As you know, we had a long relationship with Demandware and Tom and the leadership team. In fact, they even recently joined us, if you remember, at Dreamforce on stage last year. We continue to be impressed by their vision, leadership, and execution in commerce. It's very clear what a unique company Demandware is. Now how extraordinary the combination of Salesforce and Demandware will be. We already have incredible synergy in our joint customer base. In fact, I got plenty of email this morning from customers that couldn't be more thrilled about this acquisition. Many of the world's leading retail brands use Demandware as their platform for digital commerce, order management, point of sale, and store operation. Companies like L'Oréal, Marks & Spencer, Lands' End, and the list goes on and on and on. They share our passion for customer success.
It's a shared value. I'm thrilled to welcome the entire Demandware team to the Salesforce family upon the close of the transaction. Tom's right here with us on the call. It's great to have him here. I'd like to hand it over to him for his comments. Tom, it's yours.
Thank you very much, Alex. This is truly an exciting day for Demandware, our customers, and our employees. When we founded Demandware in 2004, our mission was to revolutionize how retailers engage and inspire their consumers everywhere. Today, Demandware has grown to be the largest enterprise cloud commerce company that serves some of the greatest retail brands around the world. We're the only cloud company ranked in Gartner's Magic Quadrant as a leader in digital commerce. We're headquartered in Massachusetts with more than 1,000 employees and offices around the world, including the U.S., U.K., and Germany. It's very exciting to be here today in order to join forces with Salesforce. Our agreement with Salesforce follows inbound interest that we recently received. Having spoken with Salesforce and other parties, it became clear that the combination with Salesforce is the most compelling transaction for Demandware.
In addition to providing significant value for Demandware shareholders, joining forces with the number one CRM platform accelerates our growth, our vision, and helps us to transform the future of digital commerce. The synergy and combination of Salesforce and Demandware is extraordinary. One unified cloud platform across every segment of CRM with a total focus on customer success and innovation. This is an exciting future for our joint customers, our partners, and our employees. We believe that our shared commitment to customer success and similar cultures make our companies a great fit. I want to thank Demandware's employees for their hard work, which has enabled us to reach this milestone. I'm very excited to become part of Salesforce and look forward to working together to transform and dominate the market for commerce. Let me now hand the call over to Mark.
Well, thanks, Tom, and this is truly a game-changing transaction that is highly strategic. This will extend our leadership position in addition to expanding our TAM significantly. Under the terms of the definitive agreement, we've agreed to acquire Demandware for approximately $2.8 billion, net of cash received. This represents a per-share price of $75 for all Demandware outstanding shares. We exited Q1 with approximately $3.7 billion in cash and marketable securities, and we will finance the transaction through cash on hand, along with a $500 million three-year term loan to provide additional financial flexibility in the near term. The acquisition will be structured as a cash tender offer, as John said, for all of Demandware's outstanding shares, followed by a merger. We expect the transaction to close in late Q2, subject to expiration of antitrust waiting periods and other customary closing conditions.
Assuming the transaction closes as planned, we estimate Demandware will contribute approximately $100 million-$120 million in incremental revenue for the remainder of FY 2017. By the way, this estimate includes an approximately $50 million fair value adjustment to Demandware's billed DR and unbilled DR, deferred revenue, which is off the balance sheet, a provision for modest levels of business disruption in the weeks after the acquisition closes, as well as other adjustments. Including Demandware's expected revenue contribution, we now anticipate full-year revenues in the range of $8.26 billion-$8.32 billion. For the second quarter, we estimate Demandware will contribute approximately $0-$10 million to revenue, assuming the transaction closes as planned. Including this contribution, we now anticipate second quarter revenues in the range of $2.005 billion-$2.025 billion.
From an earnings perspective, while Demandware generates a modest non-GAAP operating profit, we anticipate the acquisition-related integration costs and transaction fees of approximately $30 million, along with the incremental investment Demandware will be needing, will reduce our full-year 2017 diluted non-GAAP EPS by approximately $0.07. As a result, we now expect FY 2017 diluted non-GAAP EPS in the range of $0.93-$0.95. We expect about $0.03 of the full-year non-GAAP EPS reduction to fall in the second quarter, primarily related to due diligence, banking fees, and other transaction-related costs. This results in an updated second quarter diluted non-GAAP EPS estimate of $0.21-$0.22. In order to provide an accurate forecast for the full-year GAAP EPS changes, we need to complete the purchase accounting process after the transaction closes.
We expect to be able to provide this update when we release our second quarter results in August. However, you should expect that the impact of the GAAP EPS will be more significant than the non-GAAP EPS due to the additional stock-based compensation charges and the impact of other various non-cash items, including the amortization of acquisitions related intangibles and income tax adjustments. Turning to the cash flow, we estimate the acquisition of Demandware will reduce operating cash flow by approximately $45 million-$50 million in fiscal 2017. As a result, we now expect FY 2017 year-over-year operating cash flow growth
For the combined company in the range of 22%-23%. We look forward to updating you on the transaction and our progress in August. With that, I'd like to open up the call for questions. Keith, Alex, Tom, and I are ready, and Parker as well. Thank you.
Thank you. At this time, if you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press the pound key. Your first question comes from the line of Keith Weiss with Morgan Stanley.
Excellent. Thank you guys for taking the question, and congratulations on the transaction. Two questions, one on the revenue side of the equation and one on the expense side of the equation. On the revenue side, I was wondering if you guys could maybe walk us through where you guys see the most potent areas of synergies, in terms of bringing the two companies together. What's the timeframe we should be thinking about for those synergies to be realized by this combination? On the expense side, this is probably for Mark. How does this transaction impact your sort of longer-term margin framework that you've put out? Does this in any way sort of push out or change that dynamic between growth and profitability we've been talking about over the past couple of years?
Hi, Keith. This is Keith Block. Thanks. I'll take the first part of this, and then obviously Mark Hawkins can speak to the expense side. First of all, I just want to reiterate that we are incredibly excited about Demandware becoming part of the Salesforce family. We have had a longstanding relationship with Demandware. We've admired them. We've spoken with them for a very long time as a partner in the marketplace. What's become increasingly obvious, that as we speak to our customers, that we've moved to more of a industry orientation, and we get more mind share with our customers, as you know, in the marketplace, that the Demandware name has been coming up more and more. One of the things that this company has done very, very well historically is to listen to its customers.
We believe there are a number of synergies between Demandware and Salesforce. Our customers are telling us this. We're seeing this in the marketplace. We're seeing this in a number of industries, particularly retail and CPG. We have an incredible sales organization in our distribution organization, and this is an opportunity to bring the Commerce Cloud to the customer success platform for our customers and leverage the thousands of sales reps that we have here at Salesforce to drive customer success. Mark, do you want to take a second?
Perfect there, Keith. Keith Weiss, good morning. Thank you for the question. In terms of the long-term operating margin framework, absolutely intact. When we think about FY 2018, we think about that intact, the growth operating margin, operating cash flow framework. Thank you for that question. I will say I'm pleased to say that we're now at a scale and a size as a company that we can take one of the world's unique assets with the Commerce Cloud, with Demandware, take that on board, and yet still expand our operating margins year-over-year by approximately 70 basis points, despite taking $15 million in revenue write-down for DR, both billed and unbilled, and also taking over $30 million in deal cost. We think that that's a really good outcome.
We will continue to be the fastest-growing top 10 software company in the world this year, and we're expanding operating margin this year, even when we're taking this deal, let alone looking to FY 2018. Keith, that's where we're at. Next question.
Your next question comes from the line of Alex Zukin with Piper Jaffray . I'm sorry.
Hey, guys. Thanks for taking my question, and congratulations on the acquisition. I wanted to ask you, one for Keith, maybe what made this market so exciting for you? Then, one for Mark, just looking at Demandware's model as a percentage of GMV-based model rather than a strict subscription, how do you look at kind of integrating that into the Salesforce mix?
Yeah. Hi, Alex. This is Keith. We've had a longstanding relationship with Demandware, and their name has come up many, many times in the market. This is a company that does listen to its customers. As you know, over the last three years, we have taken a vertical orientation around industries. We think it's important to speak the language of our customers. This is an $8 billion, or soon to be $8 billion TAM marketplace. Our customers are telling us, when we're thinking about painting a vision for our customers, in the industry space around retail and CPG for sure. Again, this is a natural adjacency and a very, very unique company that is the market leader in e-commerce and the market cloud leader. It's a natural partnership. It's a natural fit. Again, we've known about these guys for a long time.
Tom and his team are terrific. Our customers are telling us, "Hey, this is a great extension and a natural adjacency to the customer success platform.
Alex, let me just jump on, Keith, the second part of that question. First of all, following the closing of the transaction, our expectations regarding integrations, we'll be looking at a lot of things. Certainly, to your point, Alex, this is a GMV-based model. We had the great pleasure to spend time with Tom Ebling, the CEO, as well as Tim Adams, the CFO, and really understand and think through this model. We see this working very, very nicely with our customer success platform and snapping in very naturally, as Keith talked about. In fact, it is that one open spot in CRM that we wanted to cover. So we see opportunities here, including even over time, looking at how this all snaps together, even down to the ideas of invoicing.
There's a lot of ideas that we'll be thinking about, again, that's following the closing of the transaction. We can get more into that. Okay? Next question.
Your next question is from the line of Ross. I'm sorry, the line of Kirk Materne with Evercore ISI.
Thanks very much, and I'll add my congrats on the deal. I guess maybe the first one for Keith. When you think about integration from a go-to-market perspective with Demandware, is this going to be somewhat similar to what we saw with ExactTarget, meaning leave the business somewhat alone and then sort of integrate in the core CRM folks over time in terms of being able to sell the product? Then just, I guess along the same lines, how should we think about Demandware and sort of the retail industry unit, how we should think about them interacting, I guess, over the next, say, 12 to 18 months? Thanks.
Yeah. Okay, great question. Let me respond to the first part, then I'm going to ask Alex Dayon to weigh in here. We had a very successful acquisition with ExactTarget and the Marketing Cloud. The integration has gone incredibly well. I think you've seen that in our financial results, and certainly driving customer success. We learned quite a bit, actually, from our acquisition of ExactTarget, and I would say we cultivated a very successful integration playbook. We expect to follow a very similar path for Demandware once the transaction's closed. Again, the customers have been asking for this, and we're not just adding a new Commerce Cloud, we're also bringing world-class commerce capabilities to the entire success platform. We're really excited about that, and particularly to the retail space. Alex, do you want to make a comment?
Yeah, no, I think, Keith, you nailed it, which is, we're very excited short-term by the synergy with the retail team and the retail division at Salesforce. It's a much bigger play for us because, as you know, our vision of the customer success platform is really to enable our customers to connect with their customers in a whole new way. That's how we build our leadership in CRM. We are the number 1 CRM vendor because we are the number 1 Salesforce automation vendor, and we're capturing market share every year. We are the number 1 customer service vendor, and we're capturing market share every year. We're up to the number 4 marketing vendor with the acquisition of ExactTarget, capturing market share every year. Actually, we gain positions every year. The only blind spot we had in CRM was commerce.
We think the market is now ready for a disruption. The future of commerce is really through solutions like Demandware, where not only you provide amazing personalized, one-to-one shopping experience on your phone, but also connecting the store into that experience. Our vision is obviously to connect all that throughout the entire customer success platform. We see Demandware as an amazing business as it is, but we see the synergies through our self-service, marketing, communities, IoT, and analytics solution as being an amazing future.
Yeah, I'm just going to add one comment there. Thank you, Keith and Alex. I think Kirk, you touched on two key things here. One is just this whole opportunity, and as Alex had talked about, Alex, I think the TAM now is what, $8.5 billion in 2020-
Yes
additional TAM opportunity that fills out that whole CRM spot that you talked about, and that is exciting to us as a company already with a large TAM. I think the second thing that Kirk touched on that I know we as a leadership team have talked a lot about is just ET and how well ET has gone and that integration and the success and really, thanks to all the team members at Salesforce who have really made that work. So I think both the opportunity and that past success really position us well here as we go forward. Yeah. Next question, please.
Your next question is from the line of Ross MacMillan with RBC Capital Markets.
Thanks so much. My congratulations to both sides on the transaction. I actually had a question for Tom Ebling. Tom, you alluded to inbound interest in Demandware, and I'd love to get your comments on why Salesforce is the best home for Demandware. Related to that, would love any commentary around customer overlap, and maybe more importantly, where does Salesforce have retail customers that Demandware doesn't? Thanks.
Okay, thanks, Ross. With respect to Salesforce being a great partner, it's actually interesting. We have modeled our business on Salesforce for so many years, looking at what they've done as the leader in cloud capabilities and really the creator of that market. We've always admired the company, and over the last few years, our partnership efforts have heated up. We have a significant portion of our customer base that are joint customers in one form or another between Salesforce and Demandware. Many of them have very creative things around clienteling and other types of applications where they've used the two technologies from Demandware and Salesforce to achieve their business goals. We're really excited about the potential combination in that respect, and we think Salesforce is absolutely a great match.
They also have a culture like ours in terms of focus on customer success and innovation and many of the principles that have been important here at Demandware. What was the third element of the question? I guess that covered the question. Yeah.
Okay. I can also comment. We've been operating through our retail team, and industry units in the retail space. We indeed have a lot of customers that are using our community product, that are using our Marketing Cloud product, where we see a lot of synergies down the road about growing faster within that install base.
Yeah, just one final comment on that. Again, as we reach higher and higher into these organizations and get more mind share, they look to us to be their trusted advisor and paint a vision for them around specific industries, retail obviously is a focus area for us. These customers are saying we want this entire suite, this entire platform around customer engagement.
Commerce is an incredibly important piece of that. That just keeps coming up more and more in the dialogue. There are very natural synergies, a great deal of customer overlap, and an incredible amount of opportunity. We're very excited about this.
Next question.
Your next question is from the line of Walter Pritchard with Citi.
Hi, thanks. I guess question for Keith or Alex, I wonder if you could talk about your B2C business right now. How much of your business are you engaged in customers on B2C efforts? You obviously started off life as a B2B vendor, but have made quite a bit of progress there. Then just related to that, wondering, you've obviously had a robust partnership ecosystem in this area. You've taken a couple markets where you've decided to move into directly versus partner. Why do that in this e-commerce space? Thanks.
I think it's a great question about this clearly is going to accelerate and bolster our product offering into the B2C space. We have a fair amount of B2C customers who are Service Cloud. I mean, you know big customers, big call centers run on Salesforce, and there's a fair amount of them who are Marketing Cloud. We are today the largest email provider for the largest retail brands in the world. In fact, we sent 3 billion emails on Black Friday, personalized one-to-one interaction on Black Friday. We have, throughout our portfolio of product, a very strong presence in B2C that has been growing over the years, thanks to Service Cloud and Marketing Cloud, and communities in particular. Clearly, what we heard from those B2C customers was the fact that commerce is changing, and the future of commerce should be connected to their customer success platform.
This strategic move for us is clearly in line with our growing presence in B2C space and what we're hearing from our customers as what they expect us to deliver to them.
Yeah. The second part of that, just with respect to our ecosystem, many of you know that we've invested significantly in our ecosystem throughout the history of the company. We think it's important to drive customer success and bring solutions to bear across many fronts, whether they're platform solutions or whether they're industry-specific or line-of-business solutions. We're going to continue to grow and nurture that ecosystem upon the close of the transaction. Again, it's an important part of our strategy. It's one of our growth planks that we've talked about a lot, in addition to industry specialization and international expansion. We're looking at this in a very positive way. Demandware has a great ecosystem of partners that they're going to be bringing to the table. There's plenty of room in this market for a lot of technology players and partners to be successful.
At the end of the day, we are all about customer success, and we want to provide the best solutions for those customers. We believe that many customers will be able to find an incredible amount of value in third-party solutions in this commerce space.
Great. Operator, next question.
Your next question comes from the line of Terry Tillman with Raymond James.
Hey, good morning, gentlemen. Thanks for taking my question and congrats as well. Keith, Alex, or Marc, I'm not sure who this would be for, but it's a big-picture question on product strategy. Part of this is a vertical fulfillment in terms of retail or consumer brands that are selling direct. Also, you talk about digital commerce, and Demandware does get in the order flow. What I'm curious about is this a bit of an evolution here in your strategy, whether it's M&A or product, in terms of not just front office, but extending into back office? It would seem, retailers would increasingly demand more from you, including maybe even getting into kind of workflows that get into back office. Thank you.
Well, I can start. I think you can feel free to jump in. I think your question is very important because the way we look at our product strategy is really to help our customers to transform them and connect their customers in a whole new way. With that vision comes really a different mindset about what is the back office, what is the front office. With their customers being connected, mobile, one-to-one, and powered by data science, you see basically the customers being into directly connected to your back office to a certain extent. In fact, the big revolution we've been seeing over the past 10 years has been the real reason for the success of Salesforce is now the customers are in your information system. Our job is to help our customers to reinvent themselves by connecting those customers through their information system.
Yes, to a certain extent, you could see that the back office now is becoming the front office in some touch points. That's clearly the trend we're seeing in the industry. It's not about us moving into back office. I think it's our customers wanting to connect their customers in a whole new way and exposing more of their back-office business processes directly to their partners, customers, and employees to deliver better experience and more productivity.
Just another comment on that. We see this in the marketplace on a daily basis where customers have back-office systems. SAP certainly comes to mind, where they're looking for a customer engagement layer that wraps around that legacy technology because they can't extract the strategic data that they need to be successful and make decisions in real time. At the end of the day, we are a customer-centric-focused company. We focus on customer success, we focus on customer engagement, and that's what's really important to us.
Next question.
Your next question comes from the line of Kash Rangan with Bank of America Merrill Lynch.
Hey, guys, congratulations. One question for Tom. Tom, what do you think Salesforce can do for you that Demandware could not do on its own? One for Alex. Alex, how do you see the product strategy shaping up? In other words, when ExactTarget was announced versus now, the product set looks completely different. Can you talk about the integration points and how the-
future of the e-commerce cloud looks like two to three years from now. Keith, finally, for you, how do you see the Salesforce integration into the broader Salesforce? Is it going to be the Marketing Cloud folks that will be selling Demandware? Your comments on how you think Demandware can move up market, because my understanding is that it doesn't sell to really large multinational companies, and how do you see that changing? Thank you very much.
This is a complex multi-part question.
There we go. Let's start with Tom.
Yeah, Tom, why don't you give us your thoughts, then Alex, you can talk about product strategy.
Yeah.
Perfect.
Okay. This is Tom. Well, Kash, I think there's so many ways in which it accelerates our mission to transform retail. When we've talked to Demandware investors about sort of 3 strategic initiatives, I think Salesforce accelerates every single one of them. We've talked about large enterprises going after the larger accounts, and the credibility Salesforce brings as well as the account relationships there, I think will be tremendous in helping us make those folks comfortable with the cloud, comfortable with Demandware. I think that's an area of acceleration. Second strategic initiative we've talked about, geographic expansion for Demandware selling to retailers in other geographies. As you know, we've just gotten started in places like Japan and Italy, but there's many untapped geographies for us, Salesforce has a very strong presence in Japan and many other geographies that'll accelerate our expansion there.
The third one is the move into sort of, we talk about unified commerce or omni-channel, but helping the retailers engage with consumers everywhere. You see places, Salesforce joint customers, who've done clienteling applications in the store with Salesforce, the combination of the CRM capabilities in terms of knowledge of the customer with the actual commerce engine, I think will be a very powerful way to accelerate that capability. I think in all the key strategic initiatives we talked about, I see Salesforce assisting us in accomplishing them.
Yeah, no, I can only support what Tom just said, which is, I think what's amazing with Demandware is not only the fact they can deliver amazing one-to-one commerce experience through a very powerful merchandising engine that runs behind the online website, but also they are multi-channel, which means that they bridge the physical to the digital world with the Tomax acquisition and the store. The fact that you can deploy clienteling apps that make store employees as efficient and personal as your own website. That's obviously a very exciting part of what makes Demandware different. As far as our product strategy is concerned, our job is really to make our customer smarter in building those one-to-one personalized interaction, we think commerce is part of it.
If you fast-forward, if you look at the future, our customer's information system are going to be powered by, of course, data, the system of records, which you need a complete view of your customers, which means not only the address, but also what they buy and the transaction. Clearly, having commerce as part of the consumer platform is important. Also, we see on top of the data, the system of engagement. What are your activity? What are the product you browse on the website? These are amazing source of signals we don't have today in our platform, we think is going to make our CRM much stronger and differentiated. At the end of the day, what you're going to see emerging across the entire application is more intelligence.
Our system of records, our system of engagement, powered by a big set of data to make all our apps smarter. Our sales apps smarter, our service apps smarter, our communities smarter, our email marketing smarter, and our commerce smarter. The signals we get from a digital commerce platform are obviously very valuable source of inputs to make sure we deliver that intelligence across the entire platform. That's why we think it's a very strategic acquisition for us. It's a very unique asset because Demandware is the only vendor who has delivered that type of one-to-one interaction in the cloud, in a multi-tenant fashion. In fact, I encourage all of you to buy on Demandware-powered website to experience the power of the one-to-one experience. They are one of the rare vendor who can deliver even custom product shopping experience, which I think is just amazing.
Yeah, just on the last point. Look, we'll be following the ET playbook. It's been highly successful. That has been a great acquisition and a great integration for us. Demandware obviously has a unique value prop that together with Salesforce and the customer success platform, are going to be stronger. There's no question about that. There's a huge leverage opportunity here, in terms of leveraging the power of our Salesforce. Thousands of people selling this product into high-level relationships that have been cultivated and nurtured over the last few years. Again, we see tremendous opportunity, just to leverage the existing sales organization. Also, quite frankly, to invest in the existing Demandware sales organization.
Great. Next question.
Your next question is from the line of Heather Bellini with Goldman Sachs.
Great. Thank you. I just had a question for Keith, and I guess following up on what Alex just mentioned. I'm just wondering if you could share with us kind of the types of integrations amongst your various clouds that you might envision going forward as a result of this transaction, that would make you even more uniquely positioned to offer with this asset as a result. Also, are there ways you think that it could help Service Cloud in its positioning, just even outside of that vertical arena?
Yeah. Hi, Heather. Thanks for the question. Look, with this technology that we find today with cloud and mobile, social, data science, IoT, et cetera. The walls between sales and service and marketing and commerce have really come down. Everybody sells, everybody markets, everybody services, and everybody conducts commerce. That's why we think this is a unique value prop in joining the Salesforce family and extending the capabilities of the customer success platform. Alex, maybe you should speak to the product integration component.
Yeah, no, product integration, I think we learned a lot with ExactTarget, by the way. I think what also is very exciting, stepping into that transaction, is I think we learned a lot in the past integration, which was about a similar size, and I think with similar challenge in terms of technology integration. Clearly, we have a very clear vision about following the closing of this transaction, what should be happening in terms of integration. We have a lot of joint customers who have shared already with us a lot of ideas. To your point, Heather, it's really not just about the retail. I mean, the retail is obviously an amazing short-term opportunity where we have today a very differentiated customer success platform that can power the complete customer life cycle, but we can do much more outside this vertical.
For us, we see the Demandware platform as an amazing complement to the other clouds, self-service, Marketing Cloud, Communities. I just want to touch on a couple example. Community, last Dreamforce, we launched the buy button, and actually Demandware was with us to share. When you're browsing a community, when you're on the website talking to other people, you can recommend. The example was, I think, with Avid, where you could recommend music, and you could buy some music. We have communities. We're running large communities like The Home Depot or Pono, the music player from Neil Young. All those communities, you can add a buy button. You can from when you collaborate with people. These are very simple points of integration that already exist. We have a fair amount of integration with our Marketing Cloud, where we can segment the marketing campaigns you're running based on your shopping profile.
When you left your cart, the first item you should receive on the email, Black Friday should be the last item you browse when you are visiting e-commerce website. When you call a call center, the agent should know what you're browsing history, so he can also engage about the product that you seem to be interested about. I'm just touching on a couple example that I think are simple example about more one-to-one personal interaction that makes every business better.
Excellent. Next question, please.
Your next question is from the line of Abhey Lamba with Mizuho.
Yeah, thank you. Keith, you guys have been talking about potential of e-commerce for a while. Did you see something in the market or at Demandware that catalyzed your decision to make a move now? Clearly, the TAM is large enough for you to be excited about. Can you discuss your portfolio in light of your comments about potential for digital commerce? Do you think you have all the pieces to capitalize on the e-commerce potential? Thanks.
Thank you for your question. Obviously, we're very excited about working together with Demandware. Again, they are the market leader, and they're the number one leader in e-commerce for the cloud, and bring significant capabilities in this space. That would be point number 1. Point number 2, we have had a longstanding relationship with Demandware. We have spent time with them historically. Alex has talked about the work that was done at Dreamforce last year. There clearly are natural synergies between the two companies. As we have continued to pivot more and more towards an industry orientation and gotten more mind share with senior executives, Demandware, that name kept on coming up in the conversation. These customers want us to become more strategic. They want us to advise them.
They want us to be that trusted advisor and paint a vision around digital transformation, this was really a great opportunity to complete that vision around digital transformation and the customer success platform. Alex, I don't know if there's any additional comment you want to make about the product set or not.
Well, I think it's clearly building strong differentiation against any competitor in the CRM space for us. I think that's why we're so excited about this transaction, because it's not only filling a blind spot we had in the CRM space. I mean, e-commerce is one of the four pillar of CRM, but it's also about differentiation and making sure we build the best customer success platform in the world. We're very excited.
Yeah
about the competitive differentiation this is bringing to that whole Salesforce ecosystem.
I'll just add in, I think the excitement is there. It's a unique asset in the world. It's the only company in the world that can really fill that spot that Alex and you have talked about, and I think we're really excited. Keith, I like the narrative, just our customers are asking.
Yeah.
At the end of the day, Abhey, is they keep asking for this capability, and we're really pleased to be able to provide it now.
One thing I just want to add.
Yeah
which working with the Demandware product team, I think we share one big common value, which is customer trust. I think both of us are really around our customer trust and success, I think that's the common language that we've been speaking for the past years working together, That's what's so exciting to be now closer together.
Great. Next question, please.
Your next question comes from the line of Philip Winslow with Credit Suisse.
Hi, thanks, guys. Congrats to both sides on the acquisition. I just wanted to touch on integration on the Marketing Cloud. It was really interesting the points that you made, they were kind of obvious points of synergies. I guess the question to the Salesforce team, when you think beyond that in sort of the synergies between the Marketing Cloud and our commerce platform and potentially other areas that are customer facing, obviously ad tech comes to mind as a potential sort of next area of synergy both between commerce and ad tech and marketing software and ad tech, your retargeting campaigns, et cetera. How do you think about where ad tech fits in in this customer experience life cycle?
Well, it's a great question because it's clearly highly connected. We had our marketing conference, Connections, a couple of months ago, where we announced our partnership with Facebook and Google, where we can integrate our data into their ad targeting technologies. With just one click, you can send your segment customer you want to segment, and automatically, you're targeting the right, leveraging Google or Facebook targeting technology. For us, it's all about the data.
I think what's important is really about building the right level of not only system of records, but enriching your data with the right level of data coming from your customer engagements, so you can be more intelligent around those data, whether you use your own intelligence, your own segmentation, your own predictive engine, or you connect to third parties like Google or Facebook, which offer actually vendors like Salesforce to basically send samples of people you want to target and retarget similar profiles in their ecosystem. Clearly, to enter that new world powered by data, powered by your customers' data, you need a lot of signals. Having the digital commerce as part of our platform is clearly a very strong asset. It's a very strategic asset for the consumer world.
Excellent. Next question.
Your last question will come from the line of Raimo Lenschow with Barclays.
Hey, thanks for taking my question, and congratulations from me as well. As I'm the last question, maybe a bigger picture question. We saw yesterday Marketo getting taken out. Oracle is getting a little bit more active. How do you see the industry evolving? It feels almost like we are in a consolidation phase where the stronger vendors are continuing to build out the scale. Is that a right observation, or should I not relate the different actions with each other? Thank you.
Yeah. Thank you for your question. We're not going to speculate on the industry. There's probably a little bit of historian in all of us, and we can all come up with our own theories about what happens with markets over time, et cetera. At the end of the day, we're all about our customers, and we're here to focus on customer success. We're thrilled to have Demandware working with Salesforce and extending our customer success platform. We are responding to our customers. We continue to innovate as a company. Innovate is a core value of our DNA. As long as we are here servicing our customers, that's really what we're focused on. Getting into speculation about where markets are going and all that, we're just focused on our customers.
Okay. On that note, just like to thank everybody. I'm going to turn it over to our co-founder, Parker Harris. I'm going to make one comment and turn it over to him for closing comments. That is that, we are, in closing, really excited. We're hitting on all cylinders as a company. You can see that based on our performance in the prior quarters. We're super excited to have the Commerce Cloud and yet another billion-dollar cloud opportunity. On that note, I'd like to turn it over to the co-founder of Salesforce, Parker Harris.
Thank you, Marc. I just want to close by emphasizing how excited we are here at Salesforce to welcome the entire Demandware team to our family here. I think culturally, when we got to know the Demandware team, we found a lot of synergies, just so excited to be working with that team. With Demandware, having this new Commerce Cloud is extending the reach of our customer success platform, not only online, but as Alex said earlier, even in the retail locations. I'm just so excited to see where this is going to take us in helping our customers connect with their customers in a whole new way.
Wonderful. Thank you so much, Parker, for the closing comments, that'll end our conference. Thank you so much.
Thank you again for participating in today's Salesforce Demandware Acquisition conference call. You may now disconnect.