By Aaron Tilley
Salesforce.com Inc. has thrived for years as a niche
business-software vendor with a chief executive, Marc Benioff, who
has positioned himself as a prominent voice in American
Now Mr. Benioff is taking steps that analysts say aim higher,
intensifying the company's battle with the industry's biggest
player: Microsoft Corp.
Salesforce is in advanced talks to acquire Slack Technologies
Inc., The Wall Street Journal reported Wednesday, in what would be
Mr. Benioff's biggest acquisition to date and the company's most
direct attack on a market Microsoft has identified as critical to
The deal, which could still fall through, would add fuel to
Salesforce's ambition to become the go-to software platform for
business customers to use for everything from data analysis to
managing customer relationships to even daily communication.
The pandemic has amplified Salesforce's efforts. When Covid-19
broke out, Mr. Benioff quickly launched Work.com -- a suite of
applications companies could use for contract tracing,
mental-health checks and shift scheduling.
A deal for Slack could heat up the simmering rivalry between
Salesforce and Microsoft. About five years ago Microsoft was in
talks to buy Salesforce, but the deal fell apart over price.
Salesforce lost out to Microsoft in 2016 in bidding for LinkedIn
Corp., the business-focused social-media network. The loss stung.
Salesforce responded by urging regulators to examine Microsoft's
proposed purchase on antitrust grounds; the deal passed regulatory
Landing Slack, which Microsoft once tried to acquire, could
amount to a bit of revenge for Mr. Benioff.
Having failed to capture Slack, Microsoft launched its own
workplace collaboration tool, called Teams, spurring a sometimes
heated battle between the two companies.
"They want to kill us," Slack CEO Stewart Butterfield told the
Journal earlier this year. This summer, Slack filed a complaint
with the European Union over alleged antitrust behavior by
Microsoft in using its dominance to push Teams.
Slack "extends the footprint of what Salesforce goes after,"
said Jefferies analyst Brent Thill. "Not everyone uses a sales
system, but everyone can use collaboration. The beauty of Slack and
Teams is that it touches everything inside enterprises."
Mr. Benioff has a history of deal making since he co-founded
Salesforce 21 years ago and turned it into one of the most
successful companies in the then still nascent market of providing
software as a service. Salesforce completed its biggest-ever
purchase last year, paying around $15 billion in stock for
data-analytics platform Tableau Software Inc.
A year earlier it splashed out more than $5 billion for
cloud-application provider MuleSoft. Inc. This year Salesforce said
it was buying cloud-software provider Vlocity Inc.
Mr. Benioff has long been one of Silicon Valley's
highest-profile and most outspoken executives, using venues like
the World Economic Forum in Davos, Switzerland, to champion causes.
He set up Salesforce with a pledge of corporate giving and bought
himself an even larger platform with his acquisition of Time
Magazine two years ago.
The San Francisco-based company also has made a big push into
the emerging field of artificial intelligence, developing tools to
help customers make better use of their data. In 2016, it acquired
PredictionIO, which makes software for building machine-learning
apps. That followed the purchase of MinHash and Tempo AI, two
further machine-learning companies. In 2014, it bought RelateIQ,
which also specializes in the field.
Breaking into the market of workplace collaboration has long
been on Salesforce's agenda. In 2010, it launched Chatter, a
private social network for companies to collaborate. And in 2016,
it bought cloud-document collaboration app company Quip Inc. for
more than $500 million. Neither product attracted a wide following.
Acquiring Slack, which Salesforce had previously explored buying,
would immediately make the company a big player in the
workplace-collaboration market. Slack has more than 130,000 paying
Salesforce, which declined to comment for this article, is
pursuing Slack as competition in its core business of customer
relationship management software is intensifying. Adobe Inc. this
month said it would buy Workfront, a platform for marketers, for
$1.5 billion. Microsoft also has been pushing its rival product,
called Dynamics. Salesforce still has the largest share with 20.1%
of the world-wide market in 2019 compared with 2.6% for Microsoft
Dynamics, according to research firm Gartner Inc.
Even with Slack, Salesforce would be a comparatively small rival
to Microsoft. The Redmond, Wash., company had sales of $143 billion
in its latest financial year, generated by business enterprise
software, its cloud-computing infrastructure, and consumer-facing
businesses, such as videogaming, which has exploded during the
pandemic. Its sales are roughly nine times Salesforce's annual
revenue. Microsoft's market valuation tops $1.6 trillion, about six
times that of Slack and Salesforce combined.
Last year Salesforce said it was seeking to reach $28 billion in
annual sales in the 2023 financial year. It had $16 billion in
sales in its most recent financial year.
"He really needs to keep growing," said Mark Moerdler, senior
research analyst at Bernstein Research, of Mr. Benioff. "He needs
another big acquisition. Slack gives him a big acquisition. It
gives him revenue."
Slack also has been looking to broaden its appeal. Companies
have used Slack principally for intra-office communications. In
June, the software provider introduced Slack Connect, which allows
messages to be sent between different companies. Slack's Mr.
Butterfield said the feature has driven a rise in paying customers
and should fuel future growth.
But big acquisition plans aren't without pitfalls. When
Salesforce tried to buy social-media company Twitter Inc. in 2016,
Mr. Benioff faced significant pushback from investors and he walked
away from the deal. Although Slack is more in the mainstream of
Salesforce's business than Twitter, it would still come at a hefty
price given Slack's $17 billion market value before Wednesday's
"Investors don't want Salesforce to do a big deal," Mr. Thill of
Jefferies said, adding they want the company to show it can
generate growth from within.
Write to Aaron Tilley at email@example.com
(END) Dow Jones Newswires
November 26, 2020 14:44 ET (19:44 GMT)
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