Purported Salesforce Takeover: Microsoft Evaluating, SAP Uninterested, Oracle Noncommittal

Following reports of leading cloud computing vendor Salesforce.com (NYSE: CRM) being in play for a potential takeover, software behemoth Microsoft Corp. (NYSE: MSFT) is reportedly evaluating a bid for the former. ^[1] The assessment is in its infancy and Microsoft is not in talks with Salesforce yet, nor is a deal imminent. Even before becoming CEO, Microsoft’s Satya Nadella had reportedly expressed an interest in acquiring Salesforce in an internal meeting last year with then-CEO Steve Ballmer. Microsoft’s ^[2] The company has refused to comment on these reports, which remain unconfirmed.

On the other hand, European software giant SAP SE (NYSE: SAP) has outright rejected any interest in acquiring Salesforce and took the opportunity to take a jab at the latter, calling it “impaired and in decline”. ^[3] Meanwhile, Oracle Corp. (NYSE: ORCL), which was considered to be the most likely suitor for Salesforce, remains ambiguous about its intentions and has refused to comment on whether it is considering a takeover. ^[4]

In the aftermath of the reports of a potential takeover, Salesforce’s shares jumped 17% to touch an all-time high of $78.46 but have since pared most of the gains. Its shares briefly spiked again following reports that Microsoft is evaluating a bid, but declined slightly thereafter and closed at

We have a price estimate of $60 for Salesforce.com, which is about 20% lower than its current market price.

See our complete analysis for Salesforce.com here

Salesforce’s Acquisition May Benefit Competitors Rather Than Its Purchaser in the Short Run

A takeover of the size of Salesforce, which currently has a market capitalization of almost $50 billion, will be a complex and lengthy affair which could take a more than a year before all loose threads are tied up. Many of Salesforce’s products are closely tied with Oracle’s database software and often utilize Oracle hardware. ^[5] Assuming the acquirer is a company other than Oracle, the technological transition involved would be a monumental and possibly messy task, which may irk Salesforce’s current customers.

Further, a deal of this size is likely to attract considerable scrutiny from regulators, which would further distract Salesforce as well as the acquiring company. While Salesforce and its potential suitor will be scrambling to untangle the inevitable legal mess, other players in the cloud computing industry may attempt to pounce upon Salesforce’s customers. A similar scenario played out with Oracle in the past, when it spent 18 months distracted by a Justice Department lawsuit regarding its hostile takeover of PeopleSoft. ^[5]

Oracle’s Co-CEO Safra Catz recently cited the same phenomenon, claiming that Oracle would benefit from the market disruption if someone else were to acquire Salesforce. ^[4]

However, it must be noted that such a disruption and the resultant opportunity for other players would be limited to the short term. If such an acquisition of Salesforce does occur, the synergies resulting therefrom in the long run would put significant pressure on other cloud computing vendors.

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap

More Trefis Research

1. Microsoft Is Said to Evaluate Possible Bid for Salesforce, Bloomberg, May 6, 2015 [↩]
2. Nadella Said to Have Proposed Salesforce Deal Before, Bloomberg, May 7, 2015 [↩]
3. SAP has ‘zero interest’ in buying Salesforce.com – CEO, Reuters, May 5, 2015 [↩]
4. If Salesforce Sells, ‘It’s Probably Good for Us’, Oracle CEO Says, Re/Code, April 30, 2015 [↩] [↩]
5. The Best Deal for Salesforce Is No Deal at All, Re/Code, May 6, 2015 [↩] [↩]