Rumored deal would enable SaaS giant to challenge Microsoft Teams
The tech industry enters the first week of December waiting to see if Salesforce will buy Slack in a potential deal first written about just before Thanksgiving that could rank with some of the largest recent software deals, such as IBM’s $34 billion acquisition of Red Hat last year.
The Lowdown: Having Slack in the fold would expand another area of competition with rival Microsoft by giving Salesforce greater collaboration capabilities that it could sell into its global customer base.
The Details: The Wall Street Journal first reported that executives with the two companies had held talks about a deal that could grow beyond $17 billion. News of the rumored talks sent Slack’s soaring, with its stock price closing Nov. 25 up 38%, though Salesforce saw its shares take a 5% dip.
Reports indicate that a deal could be announced before Dec. 9, when Slack is scheduled to unveil its quarterly financial numbers.
A deal would give Salesforce a collaboration tool to add to its larger Software-as-a-Service (SaaS) offerings at a time when the cloud-based collaboration space is booming due in large part to the COVID-19 pandemic. Vendors like Zoom and Cisco have seen business surge since the coronavirus outbreak forced companies to send their employees home to work, putting a premium on tools that enable those workers to collaborate.
Microsoft Teams has been a key beneficiary of the remote-working trend, with the company announcing in October that it had reached 115 million daily active users.
The Impact: Slack has seen strong growth since the onset of the pandemic. In the second quarter, the San Francisco-based company saw revenue jump 49% year-over-year, to $215.9 million, with the number of paid customers growing 30% to more than 130,000. In announcing the numbers, Slack officials said they expect revenue in the third quarter to increase 30% to 32%.
The company in June took a step to increase its capabilities vs. Microsoft Teams by partnering with Amazon Web Services to run its offerings on the AWS public cloud.
Background: Buying Slack and its chat technology would give Salesforce a boost in the collaboration space. Right now, Salesforce’s portfolio of social networking technology boils down to essentially Salesforce Chatter, a free collaboration tool similar to Facebook that’s available to customers on Salesforce’s platform and enables them to create networks and share files.
The Buzz: “This would be a game-changer move for [Salesforce CEO Marc] Benioff and company to further build out its collaboration engine and product footprint as cloud spending ramps across the enterprise,” Wedbush Securities’ Dan Ives told CNBC.