SAN RAMON, CALIF. – Business software pioneer Salesforce.com buys work chat service Slack for US $ 27.7 billion (C $ 35.8 billion) in deal to give two companies a better chance to compete with the long-standing power of the Microsoft industry.
The acquisition announced Tuesday is by far the most important in the 21-year history of Salesforce. The San Francisco-based company was one of the first to start selling software as a subscription service that can be used on any Internet-connected device instead of the more tedious process of installing programs on PCs. personal computers.
The flamboyant founder and CEO of Salesforce, Marc Benioff, first hailed the concept of “cloud computing” as the wave of the future.
But software as a service has become an industry standard that has turned into a gold mine for longtime software makers. Microsoft for its part has developed its own thriving suite of online services, known as Office 365, which includes a Teams chat service that includes many of the same features as the 6-year-old Slack app.
In July, Slack filed a complaint in the European Union accusing Microsoft of illegally consolidating Teams into Office 365 in a way that blocks its removal by customers who might prefer Slack.
Microsoft has also posed a threat to core Salesforce products, a line of tools that help other businesses manage customer relationships.
“For Benioff, it’s all about Microsoft,” Dan Ives, analyst at Wedbush Securities, said of Tuesday’s deal. “It is clear that Microsoft is moving further and further away from Salesforce when it comes to cloud warfare.”
Benioff left no doubt that he viewed the deal as a major blow, having lost to Microsoft in 2016 when the two companies were in a fight to buy the professional networking service LinkedIn.
“It’s a perfect game,” Benioff said on a lively conference call. “We see Slack as a unique business and platform. It is a central nervous system for so many businesses. “
Salesforce has built on its success in recent years to branch out into other areas, largely through a series of acquisitions that included its previous largest deal, a $ 15.7 billion purchase from the specialist. of Tableau Software data analysis last year.
Most of the deals were funded with shares of Salesforce, which are worth nearly seven times more than a decade ago to bring the company’s current market value to $ 220 billion. Salesforce uses its stocks to pay for roughly half of the purchase of Slack, with the rest covered by cash, with some of the cash borrowed during a period of extraordinarily low interest rates.
Slack, on the other hand, has not proven to be as popular with investors, although its service launched publicly in 2014 is increasingly used by businesses and government agencies looking for more agile alternatives to email. . Prior to the announcement of a potential deal with Salesforce last week, Slack’s stock was still hovering around its initial listing price of $ 26 when the company went public almost 18 months ago.
“This is a stellar exit strategy for Slack,” said Kate Leggett, analyst at Forrester Research. “Microsoft Teams eats Slack’s lunch.”
Slack co-founder Stewart Butterfield is hoping this sale will go better than when another company he started, the photo-sharing service Flickr, was sold to Yahoo 15 years ago. Flickr got lost in the Yahoo reshuffle amid years of turmoil before finally being sold back in 2018 to SmugMug.
In his next act after leaving Flickr, Butterfield decided to focus on gaming with a startup called Tiny Speck which was launched in 2009. A few years later, he switched to the instant messaging service whose name was the acronym for “Searchable Log of All Conversation and Knowledge.”
Leggett predicted that Salesforce would benefit from owning Slack because it will add a popular collaboration tool to its own software suite, which focuses on customer relationship management for businesses and government agencies. She said the need for customer relations officers and other Salesforce users to band together around a topic and collaborate remotely has only grown with the coronavirus pandemic that has fired so many employees from home office and made many addicts to new online tools.
If all goes well, Salesforce hopes to take control of Slack from May through July of next year.
Slack, which is free for people who use the basic version, has been quickly adopted in the tech industry for its ease of use and its promotion of a more casual conversation style than email. The company has stopped publishing its daily user count after surpassing 12 million last year, focusing instead on paying customers, who Butterfield said showed in March a “massive wave of interest” due to of how the pandemic has forced people to work from home.
“I think the pandemic played a huge role” in paving the way for the deal, Ives said. “Zooms, Slacks, Microsoft Teams, it’s going to be a new part of the workforce.”
Ives said Benioff was also running out of time to catch up with Microsoft, which remains a secondary player in Salesforce’s core customer relationship management business, known as CRM, but well ahead of delivering a larger lineup. wide of cloud-based services.
Slack and Salesforce are headquartered about a block from each other in San Francisco. Slack’s office sits in the shadow of the 62-story Salesforce Tower, the tallest building in Northern California.
“I’m looking straight out the window and you know what I’m seeing? Slack,” Benioff said.
O’Brien reported from Providence, Rhode Island.