The news that Salesforce might be on the verge of being bought has sent the rumour mill into overdrive about who the suitor might be.
According to a Bloomberg report, an unknown company views the cloud-based customer-relationship management (CRM) company as a takeover target. The report said Salesforce is working with a team of financial advisors to field offers.
The report cites unnamed sources, who went on to say there is no guarantee anything will come of the approach, but – since the news broke yesterday – speculation about who might be in the running to acquire Salesforce has been rife.
The only comment Salesforce has made in response to the report so far is that it does not comment on rumour or speculation.
Shares in Salesforce were up 11.6% at market close yesterday, with Seeking Alpha reporting a market cap of $43.52bn for the firm – meaning a buyer will be looking at a likely price in the region of $50bn.
That price tag rules a large swath of technology suppliers out of the running. Based on the likely value of the deal, the obvious candidates are Microsoft, Oracle and IBM.
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Focus falls on Oracle
Of those, Oracle has emerged as a the front runner, particularly as the firm’s CTO Larry Ellison was an early investor in Salesforce, while CEO Marc Benioff used to work for the company.
Nick Patience, research vice-president for software at 451 Research, is backing Oracle as the most likely suitor, despite the relatively large amounts of overlap between the two firms’ product portfolios.
“It’s reminiscent of when Oracle purchased PeopleSoft in 2003-2004, despite people saying at the time, ‘Oracle has got all this applications software already. Why does it need any more?’” he said.
“This is the next generation of applications software and Oracle has a story there, but it’s nowhere near as strong as Saleforce’s.”
However, pouncing on a company when its share price and market cap is on the up isn’t really Oracle’s style, Patience said, speculating that the Bloomberg report may be foreshadowing an acquisition that will only happen much later.
“Salesforce has never made a profit, and I suspect Oracle might use that as a stick to beat it with, by saying ‘it’s not a profitable company. We’re not interested,’” he said.
“I wouldn’t be surprised if the deal doesn’t happen now, but they might try to run the share price down and so it becomes cheaper later.”
Oracle took the time to lay into Salesforce during a recent conference call to discuss its third quarter financial results, with Ellison declaring that estimates about how its cloud business will stack up against Salesforce’s during the year ahead had been too conservative.
“I now believe Oracle will sell more new SaaS and PaaS business than Salesforce.com in this current calendar year,” said Ellison at the time.
Other names in the frame
Microsoft and IBM could also be credible suitors, said Patience, particularly as the former has more gaps in its product portfolio that Salesforce could adequately fill.
“IBM is suffering a little bit in terms of share price and perception at the moment, and any deal might also compromise its relationship with SAP and other software vendors a lot,” he added.
Clive Longbottom, service director at market watcher at Quocirca, also flagged Microsoft, along with Amazon Web Services (AWS) and Google, as one to watch in the wake of the news.
Although, the likelihood of it being AWS or Google is slim, he conceded, even though they could probably afford it.
“Microsoft Dynamics has not been a massive success, but Salesforce would need a major re-write to fit on Microsoft Azure,” he said. “AWS hasn’t positioned itself as a software provider to date and Google has software capabilities, but this would be a major departure for them."
This is a view shared by Patience, who said neither AWS nor Google offer the levels of sales and support, historically, that Salesforce users may have come to expect.
"If Google bought it, I think the asset would decline under its ownership and, if AWS did, it's not really in that business either," he said.
"You have to take the time to understand the customer's business problem in order to make Salesforce successful as a broad deployment, but if just you're using the vanilla Salesforce automation, fair enough, but large enterprises aren't going to do that because they'll want customisation."
Either way, if the reports turn out to be true, any takeover involving Salesforce is likely to be a hostile one, as Benioff is unlikely to let the firm go without a fight, said Longbottom.
“In essence, there is no real reason for any buyer to take Salesforce at the moment – the revenues don’t support the market cap, so it would be a rather speculative acquisition,” he said.