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Salesforce stock is taking a hit today after lighter guidance in yesterday’s earning’s report

In spite of a positive quarter with record revenue that beat analyst estimates, Salesforce stock was taking a hit today because of lighter guidance. Wall Street is a tough audience.

The stock was down $8.29/share or 4.58% as of 2:15 pm ET.

The guidance, which was a projection for next quarter’s earnings, was lighter than what the analysts on Wall Street expected. While Salesforce was projecting revenue for next quarter in the range of $4.89 to $4.90 billion, according to CNBC, analysts had expected $5.03 billion.

When analysts see a future that is a bit worse than what they expected, it usually results in a lower stock price and that’s what we are seeing today. It’s worth noting that Salesforce is operating in the same economy as everyone else and being a bit lighter on your projections in the middle of pandemic seems entirely understandable.

In yesterday’s report CEO Marc Benioff indicated that the company has been offering some customers some flexibility around payment as they navigate the economic fallout of COVID-19, and the company’s operating cash took a bit of a hit because of this.

“Operating cash flow was $1.86 billion, which was largely impacted by delayed payments from customers while sheltering in place and some temporary financial flexibility that we granted to certain customers that were most affected by the COVID pandemic,” president and CFO Mark Hawkins explained in the analyst call.

Still, the company reported revenue of $4.87 billion for the quarter, putting it on a run rate of $19.48 billion.

In a statement, David Hynes, Jr of Canaccord Genuity still remained high on Salesforce. “If you step back and think about what Salesforce is actually providing, tools that help businesses get closer to their customers are perhaps more important than ever in a slower-growth, socially distanced world. We have long reserved a spot for CRM among our top names in large cap, and we feel no differently about that view after what we heard last night. This is a high-quality firm with many levers to growth, and as such, we believe CRM is a good way to get a bit of defensive exposure to the favorable trends at play in software.”

The company is after all still on the path to a $20 billion in revenue. As Hynes points out, overall the kinds of tools that Salesforce offers should remain in demand as companies look for ways to digitally transform much more rapidly in our current situation, and look to companies like Salesforce for help.

Salesforce Commerce Cloud releases four quick-start pandemic business packs

As we move deeper into the pandemic, it’s clear that the way we conduct business is changing, maybe forever. That means that business has to change too — and fast. But if you’ve never conducted business digitally or only nominally, how do you suddenly transform on the fly?

Salesforce Commerce Cloud CEO Mike Micucci says that they were hearing from customers they needed help. Salesforce decided to build four packages of services very quickly for customers specifically designed to help conduct business during COVID-19. The company even has SI partners who will run everything for the first three months, so these businesses don’t have to do much of anything except turn the key (so to speak).

The four tools are part of the Salesforce Quick Start Commerce Solutions and include Quick Start Commerce for D2C Consumer and Essential Goods to get a site up running fast, Quick Start Commerce for Grocery and Food Service to help restaurants and grocery stores set up online curbside food purchasing systems, Quick Start Commerce for B2B for companies setting up business-to-business sites and Quick Start Commerce for Buy Online and Curbside Pickup, which enables non-food companies to move in-store inventories online, and arrange curbside pick up systems.

Quick Start Commerce for Buy Online and Curbside Pickup. Image Credit: Salesforce

Micucci says that online commerce has been operating at a holiday kind of surge since we went into lockdown 10 weeks ago and customers have been clamoring for help. He said that they responded initially with a series of materials on best practices for getting online quickly, but customers wanted something more concrete.

“We needed to bring the software to bear on this. So we designed these four quick start packages. Essentially, the whole model was that we need to get you running in weeks, not months. The goal was literally [to get you up in] two weeks, and included software, obviously our cloud-based commerce and whatnot, but more importantly it included a package of services,” Micucci explained.

To build that package, it involved more than just Salesforce itself. It needed to get partners involved too to include payment, shipping, order management and other related kinds of tooling, depending on the package requirements.

Finally, they wanted to even remove the site management headaches from the customer, at least initially. Understanding that it would be difficult for businesses to train people internally to manage the system at this time, they got systems integrators involved to do it for them for the first three months. If the customer wants to take over sooner, they can, and if they want the SI to continue to manage the whole thing, that’s fine too.

As Salesforce itself moved out of the office and home, it was observing that online sales were spiking, and Micucci says after a couple of weeks of making sure the workforce was settled, he started hearing from customers about the problems they were having conducting business, and they went to work. The first of these packages came together in just a couple of weeks including partners.

They got them out to customers for quick Beta testing and refinement to the extent they could, but the guiding principle in producing these packages was speed over perfection. They realize the products will very likely require further refinement as they get out into the field, but they learned you can produce a package to meet a pressing customer need, and do it quickly, and that’s a lesson that will likely resonate even after this crisis is over.

Salesforce researchers are working on an AI economist for more equitable tax policy

Tax policy is surely a complex beast, and depending on your political leanings, you probably have some strong feelings about how it should be implemented. Salesforce AI researchers are trying to build a model to bring artificial intelligence to bear on what will undoubtedly always be a highly political process.

Richard Socher, who heads up AI research at Salesforce, says the company is researching all kinds of solutions related to AI and business, and how it could improve the Salesforce product family; however, he also looks at how his team could use AI to solve a set of broader social issues beyond what it can do for the product line.

Socher says when you look at the biggest issues of our time, one of the largest is economic inequality, and how we could use policy to solve that. To that end, the company created a model it calls an AI economist that could look at various economic variables, a broad set of economic models and using the power of AI begin to demonstrate how various policies affect economic inequality versus productivity.

“We are using reinforcement learning to try to identify what’s optimal taxation,” Socher said. That involves building a model, one that’s fairly simple at first with some basic economic inputs like buying and selling resources and building houses to see how different scenarios affect inequality.

In a Q&A on the company website, Stephan Zheng, a member of the research team explained how this could work:

The AI Economist uses a collection of AI agents designed to simulate how real people might react to different taxes. In the simulation, each AI agent earns money by collecting and trading resources and building houses. The agents learn to maximize their utility (or happiness) by adjusting their movement, trading, and building behavior. One way to do this is to maximize income while minimizing effort, for example, making as high of an hourly wage as possible.

The modeling is designed to play to the strength of AI, by looking across a huge body of economic research and feeding all of that data into the AI economist to help build optimal models. This level of data would be impossible for even the most gifted economists to understand, but this is what AI is really good at, looking across a corpus of complex data and using all of that information to help humans make better decisions.

Ultimately, the company hopes the model can help economists and policy makers set a more equitable tax system, however an individual government might define that.

“The objective that we chose here was productivity x equality, and we hope that that will help move the pure shareholder capitalism to a more equal stakeholder capitalism — and we hope that we find a more optimal point on the quality versus productivity spectrum,” Socher explained.

While Socher admits this is an early attempt, and they hope to layer on more complex inputs over time, he likens it to early genome research. It didn’t produce concrete results right away, but over time we have seen tools like CRISPR develop, and he hopes that this approach could have a similar impact on tax policy as they build on their initial research.

“We think we found a point, at least in our first simulated environments that is even more optimal than the most commonly used baselines for taxation,” he said.