A report that Salesforce.com is entertaining takeover offers whipped up a storm of speculation Wednesday, as analysts and other observers mulled the possibility and what it could mean for the enterprise software market.
“It would require a massive deal for that to happen,” noted Ray Wang, founder and principal analyst with Constellation Research. “Salesforce still has a lot of growth ahead.”
Spurred by the approach of a potential acquirer, Salesforce has hired financial advisers to help it field such offers, according to the Bloomberg http://www.bloomberg.com/news/articles/2015-04-29/salesforce-said-to-work-with-bankers-to-field-takeover-inquiries”>report, which was based on anonymous sources. The company’s stock closed up 11.6 percent on the New York Stock Exchange Wednesday, giving it a market capitalization just north of US$47 billion.
Salesforce did not respond to a request for comment.
Rumors have swirled for some time that Salesforce is for sale, Wang noted, and clearly suitors would have to be very large companies.
“You’d have to ask who could afford it, and who could get it done,” said Michael Fauscette, a group vice president with IDC. “The afford list is maybe: IBM, Oracle, SAP, Apple, Microsoft.”
In the “who could get it done” category, however, the list is much shorter, Fauscette added. “IBM might seem like a logical choice, but I wonder if the fairly new CEO could pull it off—and whether [Salesforce CEO Marc Benioff] would let that happen.”
Oracle is a more likely candidate, “and don’t rule out SAP,” he added.
Also worth remembering is Oracle’s acquisition of Sun, when then Oracle CEO Larry Ellison “let someone else set the price” but wasn’t willing to lose the deal, according to Fauscette.
Oracle also got the vote of Frank Scavo, president of Computer Economics.
Microsoft, SAP, HP and IBM were all on Scavo’s list of possibilities, but both Microsoft and SAP would have to integrate Salesforce’s software with their respective Azure and Hana platforms. “I dont think either Microsoft or SAP would want to plop down $50 billion just to have the opportunity to start work on a big infrastructure project,” Scavo said.
HP, meanwhile, “couldnt make the Autonomy acquisition fly for $10 billion, so Im not sure theyd want to try Salesforce for five times that amount,” he added.
The logical buyer is IBM, said Denis Pombriant, managing principal at Beagle Research Group. “The company could afford it, and they have cash that they don’t know what to do with—they are buying back shares to increase shareholder value,” Pombriant noted.
In addition, aside from its consulting business, “IBM doesn’t have a big portfolio of future invention that will carry it forward, so an acquisition is logical,” he added. If it does turn out to be IBM, Oracle “will make a play in its own defense, and while we’re at it HP will join the fray for similar reasons,” Pombriant predicted.
Of course, the cultural differences are stark between Salesforce and IBM, he noted.
“Salesforce is California laid-back, IBM is New York pinstripes; Salesforce is a risk taker and IBM is risk averse,” he said. “I don’t think Benioff or his company would survive in IBM. IBM is where software companies go to die.”
Regardless of the identity of any potential buyers, there could be several factors motivating Salesforce to consider putting the company up for sale.
“The best time to sell, of course, is when the share price is at or near its top,” Scavo pointed out. “So, its possible that Salesforce sees selling out as a better opportunity right now than to continue to invest for growth.”
The company may feel the need of a larger organization to help it, “perhaps to fill in the lack of their own infrastructure portfolio,” suggested IDC research manager Larry Carvalho.
In the end, the company is obligated to shareholders to entertain all offers, Wang pointed out. “What they really want to do is get ahead of that and put in a mechanism to ensure a fair and objective process.”