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Will Microsoft Really Bid on Salesforce.com?

As rumors surfaced this week that Salesforce.com is seeking bidders to acquire the company, including possibly Microsoft, they were barely noticed in Chicago's McCormick Place, where the Ignite conference was taking place. The mere mention of it to an attendee garnered an uninterested look, where attendees were focused on taking in the wave of new wares Microsoft rolled out.

Though shares of Salesforce.com's stock were halted briefly on Tuesday when they spiked on the rumors, the reports don't suggest Microsoft has actually even made a bid, only that there are at least two bidders and that Microsoft could be one of them and SAP the other. So the speculation swirling Wall Street is just that, though oftentimes speculation does turn into reality. 

When I first read about the rumours, my reaction was that it does seem rather far-fetched that Microsoft would shell out as much as $60 billion to acquire Salesforce.com, even if it is the leading supplier of cloud-based software-as-a service applications. One has to wonder if the huge investment and cash outlay would be worth it, considering such deals rarely have the upside the architects envision.

Considering Salesforce.com's market cap is about $49 billion, a deal to acquire it with the typical premium could reach $60 billion, give or take a few billion. Salesforce.com's 2014 revenues were just over $4 billion with guidance for this year of $5.3 billion -- or 30 percent. While not shabby, last year's annual revenues increased 35 percent, suggesting growth is slowing.  Another problem: despite its revenue growth, Salesforce.com lost $263 million last year. Also Microsoft has competing, though less successful, product lines with Dynamics and Yammer, to name a few.

On the other hand, acquiring Salesforce.com, which is hugely popular with enterprises, could accelerate Microsoft's shift in transitioning into a SaaS provider and extend its developer footprint into the open source community. It would also give Microsoft an even larger presence in Silicon Valley.

Some of that upside notwithstanding, does Microsoft need to bet the farm on Salesforce.com when it could use that cash hoard in more fruitful ways?

Posted by Jeffrey Schwartz on 05/08/2015 at 12:30 PM


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