A recent article on Bloomberg claiming Salesforce has begun working with financial advisers to field takeover offers has stirred a massive rumor mill across the business and tech worlds.
Although noting that there is no certainty any deal will transpire, and only citing “people with knowledge of the matter” as a source, the article has drawn enough attention and interest to jump Salesforce’s stocks by 11.6 percent in New York trading Wednesday, giving it a market value of about $49 billion, and making the possible deal the largest software acquisition ever.
According to Forbes, Salesforce has not given any indication previously that they would consider the possibility of being acquired. Salesforce has always been fiercely proud of being at the forefront of the CRM industry, believing that their product is without question the best on the market. However, the latest anonymous report comes suspiciously close to Salesforce CEO Marc Benioff’s recent actions in the stock market, as he reportedly sold 37,500 Salesforce shares on Wednesday.
Contacted via email by the San Francisco Business Times, Benioff declined to comment on Bloomberg’s report: “We never comment on rumors simply because we can’t. Aloha, Marc,” Benioff wrote.
So what are the chances of a deal this big to actually happen? How many companies can afford it? And would it be the right move for either Salesforce or the yet-unnamed potential buyer?
Let’s start with the “Who”. There aren’t many companies out there that are able to buy Salesforce. Actually, the list is very short!
The obvious choice (and my personal guess) would be Oracle; Oracle has the right budget, and Benioff (who started his career at Oracle) has a mostly friendly relationship with founder Larry Ellison. Oracle is also trying to build up its cloud business, and recently said it expects to add more than $US1 billion in new cloud contracts this year. Also, Oracle CEO Safra Catz had refused to comment on the rumors, saying that “We never comment on these kinds of things, we’ve never had a deal leak.”
Not confirming, but also not denying.
Second comes Microsoft; Microsoft could use Salesforce to boost its cloud business, which CEO Satya Nadella has bet the company on, and pull through tons of sales of Office 365, its online productivity suite (email, document creation and sharing, and so on). The companies have been teaming up a lot recently, and to top that, Benioff tweeted from Microsoft’s BUILD conference last Wednesday.
Another good bet would be IBM; Salesforce would be a nice fit with IBM, which already has the services throughput to integrate cloud applications, and a cloud stack with SoftLayer and Bluemix. A purchase of Salesforce would give Salesforce its cloud blueprint even if it alienated a few partners. IBM’s market cap is $172.2 billion so buying Salesforce is expensive, but doable.
Other names that could be dropped are Google, Amazon, Cisco and even Apple, but all are less likely to pull the deal than the previously mentioned companies.
Salesforce is considered a big prize to those who have the financing to acquire them. But, the question becomes at this point, would a company buy Salesforce and put it under their umbrella, or would it purchase Salesforce and rebrand it under the new ownership, repurposing all that Salesforce has done?
Both options would have a major impact on the CRM market, but I personally feel the latter might even cause damage in a way, as the industry would lose Benioff’s influence and vision (Benioff took years to convince businesses that CRM cloud software was the future, and far more viable than what was available then. It’s not unsafe to assume that as a key figure and influencer he might be able to lead other ground-braking moves in the near future.
While most reporters and bloggers are currently placing bets, some argue that the leak was “a strategic one”, skillfully combined with non-denial denials by Salesforce (and Oracle as well) to boost stock prices way beyond what bidders would usually pay. Supporters of this claim point to Salesforce’s slow growth, and to the fact that while expanding rapidly, the company might want to wait with such a move until they start turning a profit, which it hasn’t done since 2011 when it was less than half the size it is now.
What do you think? What’s your take on these rumors? Let me know in the comments below.