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By Oren Laurent
President, Banc De Binary
CNBC’s David Faber reported last week that Salesforce rejected a $55 bln takeover bid from Microsoft. Founded in 1999, Salesforce has built a vast network of clients for its information management software systems. As we enter a new era, where computers handle most of our analytical thinking, it is crucial to take a step back, and consider what the Salesforce phenomenon means to the future of business.
Salesforce CEO, Marc Benioff, has been dubbed “the King of Cloud.” After 13 years of working for Oracle, Benioff began Salesforce at age 34. “My goal is just to focus on my customers, and make them successful,” says Benioff. Today, Salesforce has become a leading digital consulting company for global brands like Coca-Cola, Comcast, L’Oreal, Vodafone, Home Depot, and many more.
The idea behind Salesforce is simple: to revolutionise the way companies handle their enormous quantities of data. It was not long ago that most data was stored away in non-digital files. Today, Salesforce is a world leader in customer relationship management (CRM), even surpassing Microsoft and Oracle. Their secret is utilising technology to help companies be more efficient. The Salesforce software is designed to optimise sales, marketing, and customer service.
In its most recent earnings report, the company reported $1.51 bln in sales. Most analysts are valuing the company at $49 bln, but that number seems to keep growing. Salesforce owns 18% of the market, and has seen revenue rise at a whopping 28.2%.
So, will CEO Marc Benioff ever sell?
The rumours in Silicon Valley are that Benioff gave Microsoft a minimum offer of $70 bln for his company. When Microsoft CEO Satya Nadella declined, the negotiations broke down. Nadella said that he would need some more time to consider whether such an enormous deal would be worthwhile for Microsoft in the long run.
But, let’s put things in perspective for a moment. People who follow the news might remember how in 2009, the Walt Disney Company acquired Marvel Entertainment Inc. for $4 bln. Within the following six years, Disney used its existing assets to supercharge the Marvel movie productions. Since being acquired by Disney, Marvel has created four out of the world’s top ten highest-grossing films of all time, grossing a combined $5.12 bln.
Now, let’s take a step back and consider the number Benioff is asking for: $70 bln. In a rapidly-changing world, Salesforce will have to continue to innovate to remain relevant, and despite Salesforce’s great reputation, Nadella would surely be taking a big risk.
According to Gartner, a technology research firm, the CRM market is worth $23 bln annually. Dan Ives, an analyst for FBR Capital Markets, believes Nadella is still considering the takeover bid.
“Salesforce is the golden jewel in the cloud,” says Ives. “Given its leadership position and stellar brand and distribution, all that would have fit well within the Microsoft ecosystem in our opinion.”
Nadella’s dilemma expresses a new reality in the world of business. Information will continue to be shared in ever-innovate ways, and those at the heart of the trend, will make a buck or two.
