6 ms·

Microsoft Is Said to Evaluate Possible Bid for Salesforce.com

64 points by coloneltcb 12y ago

boomzilla 12y ago
This just doesn't make any sense, not that I know more than the next guy. Nadella is a tech guy, it's very unlikely that he wants to make his CEO depend on such a huge financial deal. Salesforce's market cap is almost 50B right now with no GAAP earning. What's in it for Microsoft?
- sjg007 12y ago
  Market share.
- toomuchtodo 12y ago
  > What's in it for Microsoft? Captive audience (Salesforce customers).
- mmanfrin 12y ago
  Doubling-down on Enterprise in the face of inroads made by Google and Apple.
  - pnathan 12y ago
    +1 Microsoft, IMO, gets business needs at a pretty hard wired and basic level, unlike Google or Apple. Their core audience and financials is B2B - consumers are, IMO, a sideshow, and likely have been since the early '90s. I'm not a huge MS fan, but I am pretty sure that I feel much more comfortable using MS services for my company as opposed to Google, whose customer service is legendary.
    - dragonwriter 12y ago
      > Microsoft, IMO, gets business needs at a pretty hard wired and basic level, unlike Google or Apple. I'm not sure they get business needs any better than Google and Apple, but they are very well-tuned to how to appeal to enterprise CTOs -- which I think is often more about appealing to business conventional wisdom than needs, per se -- on top of having the advantage for those buyers of being what IBM was a few decades earlier ("Nobody ever got fired for buying...")
- jgroszko 12y ago
  It would further orient Microsoft as a services company than a product company, so it would be consistent with some other moves they've been making (open sourcing .NET, selling Windows 10, Office as a subscription...)
  - Someone1234 12y ago
    I think you've hit on it. Microsoft's ultimate goal is for every new business to buy a Microsoft subscription which includes Windows, Office, Sharepoint Online, Exchange Online, and now maybe a Salesforce product. It is a one stop shop for all of a business's technology needs. All they need in addition to it is the physical hardware and they're good to go. Right now a lot of businesses only run on Windows+Office+online services+an accountant package. Now they won't even need the accountant package.
  - boomzilla 12y ago
    For big companies like MSFT, this needs to be quantified into future revenue and EPS. What CRM brings to the table right now doesn't contribute much to MSFT to revenue (5B more a year, with expect 20% increase next year) and negative to EPS. So all 50B+ has to be contributed to synergy and goodwill. That's a huge call, and I don't think Nadella would be able to make it.
- cykho 12y ago
  The main driver of Microsoft's net income growth over the last few years has been all enterprise software (Windows Server, SQL Server, Sharepoint). Their CRM (Dynamics) is the #2 player in the market. Acquiring Salesforce would enable Microsoft to dominate this sector (approach 50% market share potentially). Salesforce has done a great job of fostering an ecosystem of apps that rely on their data platform. Microsoft can add value to the existing SalesForce product by replacing their cloud infrastructure. While pioneering this concept in the enterprise SalesForce's infrastructure is outdated and aging. Plugging the existing customer base and app ecosystem into Azure (or Microsoft's cloud at large) could be a huge win for both companies. Net-net this makes a ton of sense in theory, but big mergers destroy value more often than not as they are extremely challenging to execute effectively (it's basically a multi-billion dollar corporate refactoring exercise).
  - adventured 12y ago
    SAP and Oracle are both larger than Microsoft in CRM. SAP is nearly twice the size of Microsoft in that segment.
    - frik 12y ago
      Salesforce.com may feel like Web 1.0 software, but SAP feels like terminal style software. The syntax of ABAP (SAP script language) is somewhat similar to COBOL: http://en.wikipedia.org/wiki/ABAP http://en.wikipedia.org/wiki/ABAP . Microsoft Dynamics CRM feels like Web 2.0. Oracle bought SiebelCRM and it's seem more modern. This says nothing about their capabilities, they are all feature rich. And conservatism in ERP and CRM business is valued by enterprise customers.
- Nicholas_C 12y ago
  Wow, I had no idea Salesforce had negative GAAP earnings since inception. I assumed they were making a killing as they are SaaS. I guess they are going the Amazon route and plowing everything back into the company to grow top line. If this rumor is true I'm guessing MSFT sees the opportunity for some serious cost synergies/reductions. At a $46B market cap that would seem to be a lot though!
  - adventured 12y ago
    Salesforce has amazing gross profit margins as you'd expect (76%), but from day one they've intentionally spent to the max seeking market share. Probably a smart move, given the vast scale of Oracle and SAP, and Oracle's general aggressiveness in trying to corner segments through acquisition to build up a moat around their business. About 50% of their revenue still goes to marketing expenditures. Another big dent in their earnings potential, of course, are the stock options they hand out (which is why Salesforce likes to talk about non-GAAP) - something like $500m to $600m per year now, equivalent to roughly 10% of sales. http://www.businessinsider.com/salesforce-earnings-q1-2014-5 http://www.businessinsider.com/salesforce-earnings-q1-2014-5
bsamuels 12y ago
> people with knowledge of the matter said. > Salesforce jumped 5.9 percent to $75.82 as of 3:01 p.m. in New York trading. This article, and the subsequent stock price hike are all the result of an anonymous tip. How can I become one of these anonymous "people with knowledge on the matter"? A malicious actor could make a killing submitting false tips on buyouts and taking advantage of the following stock price hike.
- fragmede 12y ago
  "Pump and dump" is a common form of security manipulation, which the SEC frowns upon. http://en.wikipedia.org/wiki/Pump_and_dump http://en.wikipedia.org/wiki/Pump_and_dump
- coryl 12y ago
  The difficult part is getting someone with credibility to publish your tip.
- stygiansonic 12y ago
  My guess is it is someone close to, or involved in the discussions whom the reporter knows to be reputable (by virtue of past dealings with them or their current position). There's nothing in the article to suggest the tipster is completely anonymous, and though Bloomberg is never 100% correct, I would expect them to vet their sources. The reporter could merely be protecting their source.
  - jonknee 12y ago
    It's almost certainly someone affiliated with Salesforce (perhaps one of their new investment bankers). There are only a handful of firms large enough to buy Salesforce, this is a good way to gauge interest. SAP, IBM, Microsoft, and Oracle are about it.
    - stygiansonic 12y ago
      That's a good point; it may also allow them to command a higher valuation/offer, if that's what they're looking for.
rblatz 12y ago
Perfect, they can combine the two of the most dreaded technology's to work on. Salesforce powered by Sharepoint! http://stackoverflow.com/research/developer-survey-2015#tech-super http://stackoverflow.com/research/developer-survey-2015#tech...
- Someone1234 12y ago
  After having used Sharepoint I can completely understand why people hate it. But I am a little surprised by Salesforce (and Wordpress too). Can anyone explain why it is so bad?
  - epochwolf 12y ago
    Salesforce is extremely complicated and requires an expert to configure it properly. Even then, it may not be able to do everything they say it can do in a performant manner.
    - Eric_WVGG 12y ago
      This is no joke. It feels like something out of the MS-DOS era.
    - Numberwang 12y ago
      It is genuinely my favorite program to use. It is performant and reliable, and I deal with 100s or accounts and tickets every day. Configuration is key.
    - blumkvist 12y ago
      Requires an expert to configure? No shit! What enterprise CRM software doesn't require a vendor to install and integrate?
      - bduerst 12y ago
        I was able to get the open-sourced version SugarCRM up and running without that much hassle. We used it for a while.
superplussed 12y ago
Heroku owned by Microsoft = :sadface
- mynameisvlad 12y ago
  Do you have any arguments as to why that would be? Or are you just making a blanket "M$ is evil" statement? Azure's been getting better and better, you can run Linux VMs and "apps" in a multitude of languages, similar to Heroku. I don't see how it can be a bad thing.
  - beambot 12y ago
    If they sunset Heroku in favor of the parent company's Azure architecture?
- attilagyorffy 12y ago
  my thoughts exactly. whilst i don't care about Salesforce's CRM, i wouldn't want MS to put their hands on heroku. Once MS bought one of my favourite companies (Rareware, now Rare as part of MS Game Studios), effectively they killed creativity. I'm not saying that MS is necessarily evil, all I'm saying is that I've seen this once and I have been really disappointed.
  - apapli 12y ago
    Interestingly one could say the same about salesforce.com. What positive things have they contributed to Heroku, beyond hoping their developer community would start making apps for salesforce.com overnight (which they didn't). And do many people actually use Heroku for anything serious? Once they hit a certain size it seems Heroku quickly becomes uneconomic. Heroku had its time in the sun but rapidly that day is coming to an end...
AdmiralAsshat 12y ago
Well it's not like Microsoft can make SalesForce any worse than it already is.
- tlogan 12y ago
  Yes - they can do. They can force you to use SharePoint.
zeruch 12y ago
Regardless it will be a failure...combining SFDC with Oracle or MS is pretty much the step before total organ failure from morbid corporate obesity. Every time these megamergers occur they rarely if ever succeed. If its ORacle, the company that already has 3 poorly intehrated CRMs now has 4. If its MS, then 2. None have perfectly complimentary cultures (although SFDC and ORacle are close-ish) and the monolithic creatures borne of that M&A will just collapse under its own weight. SFDC uses a Java like DSL, APex, which is lock in, whose life under either merger would be curious to see.
victorhooi 12y ago
Is Salesforce really that bad? =( Curious to hear people's thoughts on it - particularly on their Service Cloud product? What are the issues people are having? Also, can you extend it easily, or code plugins (or whatever they are) for it easily? (If I have to deal with it, keen to hear what I may be in for).
deleted 12y ago
[deleted]

64 points by coloneltcb 12y ago

This just doesn't make any sense, not that I know more than the next guy. Nadella is a tech guy, it's very unlikely that he wants to make his CEO depend on such a huge financial deal. Salesforce's market cap is almost 50B right now with no GAAP earning. What's in it for Microsoft?

sjg007 12y ago
Market share.
toomuchtodo 12y ago
> What's in it for Microsoft? Captive audience (Salesforce customers).
mmanfrin 12y ago
Doubling-down on Enterprise in the face of inroads made by Google and Apple.
- pnathan 12y ago
  +1 Microsoft, IMO, gets business needs at a pretty hard wired and basic level, unlike Google or Apple. Their core audience and financials is B2B - consumers are, IMO, a sideshow, and likely have been since the early '90s. I'm not a huge MS fan, but I am pretty sure that I feel much more comfortable using MS services for my company as opposed to Google, whose customer service is legendary.
  - dragonwriter 12y ago
    > Microsoft, IMO, gets business needs at a pretty hard wired and basic level, unlike Google or Apple. I'm not sure they get business needs any better than Google and Apple, but they are very well-tuned to how to appeal to enterprise CTOs -- which I think is often more about appealing to business conventional wisdom than needs, per se -- on top of having the advantage for those buyers of being what IBM was a few decades earlier ("Nobody ever got fired for buying...")
jgroszko 12y ago
It would further orient Microsoft as a services company than a product company, so it would be consistent with some other moves they've been making (open sourcing .NET, selling Windows 10, Office as a subscription...)
- Someone1234 12y ago
  I think you've hit on it. Microsoft's ultimate goal is for every new business to buy a Microsoft subscription which includes Windows, Office, Sharepoint Online, Exchange Online, and now maybe a Salesforce product. It is a one stop shop for all of a business's technology needs. All they need in addition to it is the physical hardware and they're good to go. Right now a lot of businesses only run on Windows+Office+online services+an accountant package. Now they won't even need the accountant package.
- boomzilla 12y ago
  For big companies like MSFT, this needs to be quantified into future revenue and EPS. What CRM brings to the table right now doesn't contribute much to MSFT to revenue (5B more a year, with expect 20% increase next year) and negative to EPS. So all 50B+ has to be contributed to synergy and goodwill. That's a huge call, and I don't think Nadella would be able to make it.
cykho 12y ago
The main driver of Microsoft's net income growth over the last few years has been all enterprise software (Windows Server, SQL Server, Sharepoint). Their CRM (Dynamics) is the #2 player in the market. Acquiring Salesforce would enable Microsoft to dominate this sector (approach 50% market share potentially). Salesforce has done a great job of fostering an ecosystem of apps that rely on their data platform. Microsoft can add value to the existing SalesForce product by replacing their cloud infrastructure. While pioneering this concept in the enterprise SalesForce's infrastructure is outdated and aging. Plugging the existing customer base and app ecosystem into Azure (or Microsoft's cloud at large) could be a huge win for both companies. Net-net this makes a ton of sense in theory, but big mergers destroy value more often than not as they are extremely challenging to execute effectively (it's basically a multi-billion dollar corporate refactoring exercise).
- adventured 12y ago
  SAP and Oracle are both larger than Microsoft in CRM. SAP is nearly twice the size of Microsoft in that segment.
  - frik 12y ago
    Salesforce.com may feel like Web 1.0 software, but SAP feels like terminal style software. The syntax of ABAP (SAP script language) is somewhat similar to COBOL: http://en.wikipedia.org/wiki/ABAP http://en.wikipedia.org/wiki/ABAP . Microsoft Dynamics CRM feels like Web 2.0. Oracle bought SiebelCRM and it's seem more modern. This says nothing about their capabilities, they are all feature rich. And conservatism in ERP and CRM business is valued by enterprise customers.
Nicholas_C 12y ago
Wow, I had no idea Salesforce had negative GAAP earnings since inception. I assumed they were making a killing as they are SaaS. I guess they are going the Amazon route and plowing everything back into the company to grow top line. If this rumor is true I'm guessing MSFT sees the opportunity for some serious cost synergies/reductions. At a $46B market cap that would seem to be a lot though!
- adventured 12y ago
  Salesforce has amazing gross profit margins as you'd expect (76%), but from day one they've intentionally spent to the max seeking market share. Probably a smart move, given the vast scale of Oracle and SAP, and Oracle's general aggressiveness in trying to corner segments through acquisition to build up a moat around their business. About 50% of their revenue still goes to marketing expenditures. Another big dent in their earnings potential, of course, are the stock options they hand out (which is why Salesforce likes to talk about non-GAAP) - something like $500m to $600m per year now, equivalent to roughly 10% of sales. http://www.businessinsider.com/salesforce-earnings-q1-2014-5 http://www.businessinsider.com/salesforce-earnings-q1-2014-5

bsamuels 12y ago

> people with knowledge of the matter said. > Salesforce jumped 5.9 percent to $75.82 as of 3:01 p.m. in New York trading. This article, and the subsequent stock price hike are all the result of an anonymous tip. How can I become one of these anonymous "people with knowledge on the matter"? A malicious actor could make a killing submitting false tips on buyouts and taking advantage of the following stock price hike.

fragmede 12y ago
"Pump and dump" is a common form of security manipulation, which the SEC frowns upon. http://en.wikipedia.org/wiki/Pump_and_dump http://en.wikipedia.org/wiki/Pump_and_dump
coryl 12y ago
The difficult part is getting someone with credibility to publish your tip.
stygiansonic 12y ago
My guess is it is someone close to, or involved in the discussions whom the reporter knows to be reputable (by virtue of past dealings with them or their current position). There's nothing in the article to suggest the tipster is completely anonymous, and though Bloomberg is never 100% correct, I would expect them to vet their sources. The reporter could merely be protecting their source.
- jonknee 12y ago
  It's almost certainly someone affiliated with Salesforce (perhaps one of their new investment bankers). There are only a handful of firms large enough to buy Salesforce, this is a good way to gauge interest. SAP, IBM, Microsoft, and Oracle are about it.
  - stygiansonic 12y ago
    That's a good point; it may also allow them to command a higher valuation/offer, if that's what they're looking for.

rblatz 12y ago

Perfect, they can combine the two of the most dreaded technology's to work on. Salesforce powered by Sharepoint! http://stackoverflow.com/research/developer-survey-2015#tech-super http://stackoverflow.com/research/developer-survey-2015#tech...

Someone1234 12y ago
After having used Sharepoint I can completely understand why people hate it. But I am a little surprised by Salesforce (and Wordpress too). Can anyone explain why it is so bad?
- epochwolf 12y ago
  Salesforce is extremely complicated and requires an expert to configure it properly. Even then, it may not be able to do everything they say it can do in a performant manner.
  - Eric_WVGG 12y ago
    This is no joke. It feels like something out of the MS-DOS era.
  - Numberwang 12y ago
    It is genuinely my favorite program to use. It is performant and reliable, and I deal with 100s or accounts and tickets every day. Configuration is key.
  - blumkvist 12y ago
    Requires an expert to configure? No shit! What enterprise CRM software doesn't require a vendor to install and integrate?
    - bduerst 12y ago
      I was able to get the open-sourced version SugarCRM up and running without that much hassle. We used it for a while.

superplussed 12y ago

Heroku owned by Microsoft = :sadface

mynameisvlad 12y ago
Do you have any arguments as to why that would be? Or are you just making a blanket "M$ is evil" statement? Azure's been getting better and better, you can run Linux VMs and "apps" in a multitude of languages, similar to Heroku. I don't see how it can be a bad thing.
- beambot 12y ago
  If they sunset Heroku in favor of the parent company's Azure architecture?
attilagyorffy 12y ago
my thoughts exactly. whilst i don't care about Salesforce's CRM, i wouldn't want MS to put their hands on heroku. Once MS bought one of my favourite companies (Rareware, now Rare as part of MS Game Studios), effectively they killed creativity. I'm not saying that MS is necessarily evil, all I'm saying is that I've seen this once and I have been really disappointed.
- apapli 12y ago
  Interestingly one could say the same about salesforce.com. What positive things have they contributed to Heroku, beyond hoping their developer community would start making apps for salesforce.com overnight (which they didn't). And do many people actually use Heroku for anything serious? Once they hit a certain size it seems Heroku quickly becomes uneconomic. Heroku had its time in the sun but rapidly that day is coming to an end...

AdmiralAsshat 12y ago

Well it's not like Microsoft can make SalesForce any worse than it already is.

tlogan 12y ago
Yes - they can do. They can force you to use SharePoint.

zeruch 12y ago

Regardless it will be a failure...combining SFDC with Oracle or MS is pretty much the step before total organ failure from morbid corporate obesity. Every time these megamergers occur they rarely if ever succeed. If its ORacle, the company that already has 3 poorly intehrated CRMs now has 4. If its MS, then 2. None have perfectly complimentary cultures (although SFDC and ORacle are close-ish) and the monolithic creatures borne of that M&A will just collapse under its own weight. SFDC uses a Java like DSL, APex, which is lock in, whose life under either merger would be curious to see.

victorhooi 12y ago

Is Salesforce really that bad? =( Curious to hear people's thoughts on it - particularly on their Service Cloud product? What are the issues people are having? Also, can you extend it easily, or code plugins (or whatever they are) for it easily? (If I have to deal with it, keen to hear what I may be in for).

deleted 12y ago

[deleted]