Since a report surfaced in Bloomberg more than a week ago, it’s been the talk of the tech market: Will Salesforce.com be bought out?
Perhaps a more intriguing question though is: Should Salesforce sell out?
A sale of the $46 billion market-cap company would be one of the largest tech acquisitions in history and could dramatically help a potential acquirer gain a significant foothold in the fast-growing SaaS cloud computing market.
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As the company has grown, it’s stuck with its message that business should ditch licensed software they run themselves. That’s an unrealistic proposition for most companies though, a new report by technology researchers finds. That fundamental disconnect between Salesforce’s business model and how enterprises are using the company’s products is one of the biggest reasons Salesforce.com may be sold. “Now that it’s clear most customers will be hybrid, and not purely public, Salesforce becomes more valuable as one choice in a broader toolset than as an independent pure public cloud vendor,” the report by New Hampshire-based Technology Business Research finds.
In its illustrious history the company has grown rapidly, but struggled to be profitable. In 2014 Salesforce.com posted just more than $4 billion in annual sales, but lost $286 million. A year earlier it lost $110 million on $3 billion in sales. TBR suggests that being part of a larger company could bring with it some advantages. “For Salesforce, being acquired would finally provide true cross-selling and go to market efficiency they have struggled to achieve on their own,” researchers say.
The SaaS market is more competitive than it’s ever been, so having a leg-up with a big backer could be a benefit to the company.
For an acquirer it is a potentially attractive purchase, albeit an expensive one. Salesforce has a large install base and it’s still growing quickly. It’s also set up well to play in emerging technology markets, such as the platform as a service (PaaS) market. That means Salesforce could help a company like Microsoft round out its existing cloud products, or help a company like Oracle or IBM solidify its stake in this still-emerging market.
At this point all this is just conjecture: Neither Salesforce, nor any of the companies rumored to be exploring a purchase have made any public statements acknowledging it. The whole situation was spurred by a report noting that Salseforce has hired a firm to help it filed offers. TBR believes that if multiple vendors are in the running that a sale is a “very likely” outcome though.
If one of the first companies to create a successful cloud-business model gets sold, it could mark what Forbes columnist Jason Bloomberg calls the “end of the beginning” of the cloud market.