Top 3 Potential Suitors For Salesforce
Salesforce.com is up for an acquisition as the company has hired financial experts to guide it through the process. The news of Salesforce’s potential takeover that first appeared in Bloomberg last week, created waves in the industry. “It would require a massive deal for that to happen,” noted Ray Wang, founder and principal analyst with Constellation Research.
While speculations are abuzz, and there many companies are reportedly vying on this space, we list out some of its top suitors.
Oracle: This can be anybody’s guess that Oracle would be the most likely candidate to buy Salesforce. For one thing, at the root of Salesforce’s many cloud applications lies an Oracle database. At the same time, Oracle is currently in the process of readying its traditional on-premise business applications to run in the cloud.
FBR Capital Markets analyst Dan Ives in a note to clients last week said Oracle is the most “realistic buyer” as it seeks to grow its presence in the cloud and software-as-a-service markets.
Oracle’s large balance sheet - the company reported $43.8 billion in cash and $32.3 billion in debt in its February quarter - make it a prime candidate, he said, as Salesforece.com, with an enterprise value of almost $50 billion, would be one of the largest acquisitions in enterprise software history if sold. Ives also notes that several Salesforce.com c-suite members, including CEO Marc Benioff and President Keith Block, are former Oracle employees.
“We believe a ‘game changing’ acquisition of Salesforce.com would fit right into Oracle’s wheelhouse as it could help accelerate the database stalwart’s painful cloud transition,” he said in a market Watch report.
Microsoft: Microsoft is the best fit as a buyer, according to some analysts. Salesforce and Microsoft compete directly in the market for customer relationship management (CRM) software, used for tracking sales contacts and deals among others. Microsoft’s Dynamics commands a 7 percent share to Salesforce’s 16 percent, according to Gartner. It would certainly want to expand in this area, with the help of a strategic alliance.
Since launching Office 365 as a cloud software offering, Microsoft now has a leading software-as-service product that could easily be combined and integrated with Salesforce’s CRM, marketing and other applications. In fact, the two forged a “strategic partnership” last year. Microsoft has been courting Salesforce.com for nearly a year. Analysts at Stifel note in their website “our checks have indicated that the CRM relationship has gotten considerably cozier over the last 9-12 months, following MSFT’s move to open its Office APIs to CRM.”
Another obvious reason, as Garrett Cook, Benzinga’s tech analyst notes is that Microsoft is looking for mobile relevance and this could be the best option. At present Microsoft is lacking in its turnaround is relevance in the mobile market – a point that one should not miss out – bringing Microsoft closer to its mobile-cloud vision.
IBM: The third possible suitor is IBM – which is looking to rebuild itself around the cloud, while investing billions of dollars in expanding its cloud computing services and software. Salesforce would be a largely complementary acquisition, as there’s not a lot of overlap in its applications, and those that are similar could probably be combined, says a Re/Code report.
IBM has proven itself to be very acquisitive in years past. Over a three year span IBM has spent $4.5 billion to acquire a dozen companies in the cloud, including SoftLayer for $2 billion. Moreover, both salesforce.com and IBM are enterprise service providers. IBM’s on-premise IT business has suffered owing to the rise of the cloud. Clearly, salesforce.com could help IBM in this area, strengthening its cloud app business.
While IBM can find the buyout attractive as it seeks to reinvent itself, its challenge would be a financial one and that may be a put off.
Others: While we believe Oracle, Microsoft and IBM are the strongest suitors in the deal, experts are also keeping an eye on SAP, HP and Google. For example, Salesforce CEO Marc Benioff and SAP CEO Bill McDermott “held discussions last year about possible strategic alliances between the two companies,” Bloomberg reports though nothing transpired until now.
Search engine Google’s primary play for business users has been Google for Work, a suite of cloud-based applications that compete with Microsoft’s Office 365. Google also has sufficient capital so it cannot be ruled out.
Last but not the least, HP is also among its several suitors – looking to strengthen its position in the cloud.
Whether the report is rumoured or Salesforce will be bought out by one of these tech giants, analysts are convinced the acquisition would be among the largest ever for a tech firm, dwarfing the likes of HP-Compaq ($25bn) and Facebook-WhatsApp ($22bn) to name a few. This would be an interesting space to watch out for!
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