Four years ago, Microsoft dropped $27 billion on the world’s worst social media network, LinkedIn. Paying a 50% premium for something which no one seemed to understand (but which unlike the now well-and-truly dead Quibi was at least free to use) was mystifying at the time and, indeed, until relatively recently. But it did have one immediate effect beyond briefly denting MSFT shares: It made Salesforce’s Marc Benioff extremely angry, as he, too, wanted to buy LinkedIn for some reason.
And thus a rivalry was born. Since the LinkedIn deal, Benioff’s been chasing that dragon, dropping $6.5 billion on an integration software company and $15 billion on a data visualization company. And, sure, it paid a 42% premium for the former and a 36% premium for the latter, but neither really scratched that “how do you like them apples Satya you backstabbing prick?” itch. This, on the other hand? Oh, yea, this scratches it real good.
Salesforce is making the biggest acquisition in its 21-year history, announcing on Tuesday that it’s buying chat software developer Slack for over $27 billion…. That comes to about $45.86 a share. Prior to initial reports of a deal last week, which led to a 38% pop in Slack’s shares, the stock was trading at under $30.
Benioff has what he calls a “$50 billion dream” for Salesforce’s annual revenue, which would surpass every maker of business applications short of Microsoft. The chairman and chief executive officer, who has been the overseer or architect of more than 60 deals since his company’s start in 1999, is getting something he has sought for more than a decade -- a transformational communications asset. He’s also further cementing Salesforce as Microsoft’s chief rival in business applications…. “Slack is probably a bigger threat to Microsoft in some ways than Salesforce is because Slack’s use case hits at the heart of Microsoft’s information worker’s productivity suite,” said Gregg Johnson, a former Salesforce executive and the CEO of Invoca Inc., which uses artificial intelligence to help businesses track and analyze customer conversations. “That’s like the jewels in the crown of Microsoft. Dominating the information worker is how Microsoft has printed money for 25 years.”
Of course, it looks as if, like Nadella before him, Benioff may have to wait for some sustained satisfaction. Possibly forever, because Zoom Slack ain’t.
“We have been surprised by the limited success Slack has seen from the pandemic and the rise of remote work,” wrote Rishi Jaluria, an analyst at D.A. Davidson, in a report last week. “Microsoft Teams has been able to capitalize on the opportunity presented by the pandemic better than Slack, in our view, and this rapid growth in adoption has hurt Slack.”