Another development overnight in the ongoing saga around Salesforce's ownership status. Some weeks ago, when it was alleged that Salesforce was taking legal advice over a possible takeover offer, there was much discussion about who the suitor could be. One of the possible candidates was Microsoft. While only a few short years ago this would have seemed impossible, the recently minted Microsoft CEO, Satya Nadella, has certainly changed things at Microsoft and it now has a ring of truth to it.
That ring is sounding louder given a CNBC report that Microsoft did indeed bid for Salesforce but that terms could not be agreed upon. According to the report, Salesforce's CEO, Marc Benioff, was chasing a $70 billion purchase price while Nadella was only offering $55 billion. According to the report, the talks did not resume after they fell apart.
As many have commented, despite competing heavily in the customer relationship management (CRM) space, Microsoft and Salesforce are complementary in other areas, and the move would greatly help Microsoft with its broader enterprise cloud strategy.
CNBC has some detail on how the deal was planned on being structured. While Microsoft was set to suck up much of its $95 billion cash reserve to pay for Salesforce, there was discussion about a model that would allow Benoff to roll his 5.7 percent stake of Salesforce equity directly into Microsoft stock. In line with that Benoff would have had a management role at Microsoft should the deal have been consummated. Apparently talks finished in early May and sources are doubtful that they will begin again soon.
This interesting development raises many questions. In particular whether Microsoft was the only suitor or whether other interested parties were or still are, in play. There have been some comments about how an acquisition of the Salesforce juggernaut could come from Amazon. While corporate cultures between the two are very different, this would create an intriguing possibility. Both companies are hugely dominant in their particular areas. Should Amazon and Salesforce combine, there would be some very threatened vendors out there.
All of this comes just after Salesforce announced its first quarter earnings. The company saw adjusted profit of $0.16 per share on revenue if $1.51 billion. This after the market had expected the SaaS firm to report $0.14 in adjusted, per-share profit on revenue of $1.5 billion. For the current quarter, the second of its fiscal 2016, Salesforce expects revenue of $1.59 billion, generating adjusted profit of between $0.17 and $0.18. The market currently expects $1.59 billion in top line, and a similar $0.17 in per-share, non-GAAP profits.
Benioff, ever the confidence-builder, talked of what this meant for the industry, noting that:
Salesforce has surpassed the $6 billion annual revenue run rate faster than any other enterprise software company, and our current outlook puts us on track to reach a $7 billion revenue run rate later this year.
That's an attractive statistic and one unlikely to be missed by potential suitors.
