Wow. Everyone seems to miss the point of what this is about.
MS wouldn't buy Salesforce (just) for the technology any more than Oracle bought Sieble and PeopleSoft for their technology.
CRM vendors are bought for their customers. CRMs are so deeply integrated into a company's business that the are basically guaranteed money into the future.
Exactly how much money is the only question.
(MS already has a competent CRM offering and a good cloud story. All this talk that they should spend their money to build a competitor misses the point!)
Salesforce has a pretty big lock-in factor, particularly because it has integration and customization points everywhere. If you're a big corporation, or even a smaller outfit like the one I work for, after you've invested the money and time to get your workflows and data into Salesforce, and spent the money on consultants and custom software to integrate Salesforce data into your compliance system et al, switching CRM platforms is a huge deal. You've got to get all that data back out again, imported into whatever the new system is, and wire up all the integrations with your other systems anew.
>Salesforce's stock has been trading at all-time highs — partly because of rumors about a take-over, but also because the company has had some really good quarterly earnings and is growing fast.
>Now that it appears merger talks are over, shares of Salesforce are climbing again.
Stock price climbed due to potential for a merger.
Stock price climbs again due to end of potential for a merger.
Does a merger have an effect on the stock price? Its presence and absence are both (partial) causes for stock price growth.
I'm probably primed for this due to an article on a logic puzzle[0].
I have no idea whether the price offered was a good one, but the reason that both the rumors of talks, then the dissolution of talks, could cause the stock price to rise is pretty simple:
1) Rumors circulate of a pending acquisition. Obviously that acquisition will have to happen at a premium to the current price or it won't happen, so that's a signal that if you buy at today's price, you can sell in the acquisition and make a profit. People start buying on that rumor, causing the price to rise.
2) Reports subsequently surface that a $55B offer, which would have been a premium from the original price, was rejected and that $70B was sought. People think "well maybe the real clearing price is something like $65B" -- and that's higher than today's price, so people buy at today's price in hope of making a profit if/when that transaction eventually takes place. The price therefore rises again.
Again, no idea what the price "should" be today, but it's not illogical that the price could rise both on the rumor and on the end of the rumor (especially when, as here, the explanation for the end was the (possibly self-serving) "the price wasn't high enough!").
I don't know, it's not, like, crazy to imagine that both a merger and rejecting a merger might increase stock price.
Imagine that someone has the mineral rights to an area in which they assert there might be valuable mining. You are interested, but lack the expertise to evaluate their claims.
Now suppose that a savvy third party comes along and makes them a sizable offer for the mineral rights. You may think, "Okay, this third party has expertise that I lack -- I am upgrading my belief that there really are valuable minerals here."
Now if the original party rejects that offer on the grounds that it's not high enough, you might think, "Okay, they aren't idiots -- if they rejected that offer, they must have genuine reason to believe they can get more later," and upgrade your beliefs again.
They should be bloody innovating and figuring out how to make better products, not doing internal political infighting. $55B buys you a lot of runway if you want to dedicate it to making your own products.
Hell, for $55B you can buy all the developers and people at Salesforce who are any good at all and wind up with a decent product team. Rent a hotel near the Salesforce offices and offer generous bounties.
I don't disagree with your overall point (that this would have been a poor acquisition), but nobody anywhere is seriously suggesting that the Salesforce product would cost $55B to replicate, or that Salesforce's product + team is worth $55B.
I think that's a fallacy. $55B can still get you a great product and a lot of customers, and you can probably do a better job of product development. You don't need SF's particular customers, or if you do, maybe you don't want them with the products that SF has.
Why buy a legacy when you can do something better? I guarantee you that whatever SF has can be done better and cheaper.
Why not get hungry sales people who are willing to take SF's customers away from them?
I see these deals coming from people who are incapable of technology development, who have been stalled in corporate culture and who have to justify their existence by making big deals. They are terrified of doing development because they don't know how to -- but they know how to "do deals" and so that's what you get out of them.
Microsoft's successes seem to come from buying technology (not all the time). Historically they haven't been very good at buying customers or teams, or doing strategic "Deals" (capital-D).
I don't know: 55b is a huge number, not unfathomable of course but huge. Salesforce is a great company and a no doubt innovative and disruptive one, but they hold no talent that Microsoft doesn't have and they will hold very few businesses that are not already Microsoft customers in some regard. You might be able to argue that they have a lot of cloud expertise, but Microsoft has already built some incredible cloud offerings in Office365, Outlook and Onedrive that share a lot of the overlap with Salesforce. I have a hard time believing that Microsoft would even want any part of that, it just seems like a huge waste of cash for a very little upside. If they had mentioned Oracle, it might be a little more feasible.
The difference between Oracle and Microsoft is that Oracle has offerings in the majority of the places that Salesforce.com plays in. Oracle has a CRM, a Marketing Cloud, Analytics, and so on.
Microsoft has a CRM, but not one with a significant market share. They also have an analytics platform, but not one that is as clearly defined - there's SQL Server, Azure Analytics, BI for 365. They have no marketing management, no real helpdesk/support system, etc.
If anything I would say that there is much less overlap between MSFT and SFDC vs. Oracle and SFDC.
Plus Ellison is an investor in Netsuite - not that it precludes a SFDC acquisition, but it's yet another hurdle.
Very true. I work for SalesForce's only major competitor. We were acquired by Oracle as social marketing is a space that they had almost no understanding of but a strong desire to enter. Since our company was already researching social analytics, sentiment analysis and direct social marketing tools, I'm sure it was easier for them to acquire us than start R&D on their own tool suites. Not to mention our already installed client base. Salesforce is a hot commodity in our space. Were MS to acquire them they would have a foot in the social space with almost no time investment and little onboarding expenses. I'm kind of surprised this deal fell through.
Salesforce is also generating $6b of revenue per year, and is still growing really fast. It's an awesome business to own even if it didn't have the other benefits of improving Microsoft's capabilities/talent.
I don't think a potential acquisition would mean much for Heroku's independence, they continued business as usual after the SFDC acquisition, so it'd make no sense for Microsoft to worry about rolling them into Azure (these things take years in practice), at least in the short term.
Microsoft is definitely a lot friendlier to Linux and open source these days, though I think a Microsoft-owned hosting platform atop Linux and AWS would be .. strange. I suspect they might even divest it as part of the acquisition.
They do support many more platforms, though I suspect that's still the lion's share of their deployments, they're still very active in that community, and they still support Ruby development through Matz's paycheck. On the flip side, Heroku is still a major deployment option amongst many startup and shops that rely on Rails. If anything happened to Heroku (I doubt it would) it would have a very significant impact on the Rails world.
What if this was a mutually agreed upon hoax meant to play the media? Salesforce reminds people "Hey we're worth a lot and our growth prospects mean we can turn down huge sums of money." Microsoft reminds people "Yeah we have $95 billion in cash and can afford big acquisitions."
Has anyone considered Google? It was odd, I recently was accepted into one of their internal programs and noticed they used Salesforce as their CRM. I know this is not nearly enough evidence but Google doesn't have a CRM and think it might be an obvious choice.
While Google has some enterprise offerings, I think Google is right now more interested in selling to people who sell to enterprise than selling directly to the mainstream of what people talk about when they talk about enterprise.
Yeah but it's a different sort of "enterprise space". They do a bit of "big data", a little of infrastructure (much-neglected Apps, which are mostly oriented to SMEs anyway) and ads.
They don't sell a reporting package (i.e. THE enterprise tool), payroll, ERP, OLAP, consolidation tools... none of that. That's the real big-corp "enterprise" stuff, and they don't seem particularly interested in entering that space.
So admittedly I was intentionally misinterpreting what you meant (Journalists must have a term for this since they do it all the time).
I think we can both agree that "Enterprise" is too broad, vague, and context dependent. Is there a good collective noun that represents the "enterprise stuff" (mostly internal management tools but not exclusively so)? It'd be a useful term to have.
MS wouldn't buy Salesforce (just) for the technology any more than Oracle bought Sieble and PeopleSoft for their technology.
CRM vendors are bought for their customers. CRMs are so deeply integrated into a company's business that the are basically guaranteed money into the future.
Exactly how much money is the only question.
(MS already has a competent CRM offering and a good cloud story. All this talk that they should spend their money to build a competitor misses the point!)