Salesforce-Toyota Make Allies

Salesforce.com Inc. (CRM - Analyst Report) recently announced a strategic alliance with the multinational automobile manufacturer Toyota Motors Corp. (TM - Analyst Report). Under the terms of the agreement, the companies will jointly develop a private social networking service, Toyota Friend, for Toyota owners.

The service will be based on Salesforce.com’s Chatter application. Chatter is a collaboration application for enterprises, which enables users to connect and share information securely. Chatter also connects an organization’s employees with existing and prospective customers.

Toyota Friend will feature a chat system, which will help customers in car maintenance through reminders akin to “tweets” from Twitter. Each car will have its own account on Toyota Friend, through which its owner will get text reminders for maintenance jobs like fuel refills or battery recharge. Interestingly, the car and its driver would be in conversation through this new service.

In January 2011, Salesforce.com acquired the Web-based video conferencing firm, Dimdim, which provides a cloud-based real-time communications platform. Dimdim’s capability added real-time communication to the Chatter platform, aiding direct interaction through the platform itself. Real-time chat, voice calling and image sharing are now possible over Chatter.

Social networking services have virtually redefined human communication. From personal to professional interaction, social networking has become the order of the day.

During the recently concluded first quarter, Salesforce witnessed continuous deployment of Chatter. Notable customers include: Akamai Technologies Inc. (AKAM - Analyst Report), Seagate Technologies Inc. (STX - Snapshot Report), GlaxoSmithKline plc (GSK - Analyst Report), O2, Savvis Inc. (SVVS), Sony Corp. (SNE - Snapshot Report), Starwood Hotels (HOT - Analyst Report), Avaya, Bausch & Lomb, Juniper Networks Inc. (JNPR - Analyst Report) and Symantec Corp. (SYMC - Analyst Report).

We are encouraged by the strategic alliance between Salesforce and Toyota, as it opens up opportunities in the evolving automotive vertical.

Salesforce.com reported decent first quarter 2012 results. It also provided an encouraging guidance for the second quarter and full-year 2012 based on strong demand for its business software and customer additions.

We, however, caution investors about strong competition in CRM application and cloud-computing areas.

Currently, Salesforce.com has a Zacks #3 Rank, implying a short-term Hold recommendation.

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