Salesforce has hired advisers to look at a takeover offer, Bloomberg just reported.
The stock was halted on the rumour and immediately rose more than 10% as soon as trading resumed. With the rise, the company’s market cap is about $US47 billion.
The list of companies who would want and could afford to make the buy is very small:
- Oracle has $US13.7 billion in cash and another $US30 billion in marketable securities that could be turned into cash pretty quickly. Plus the company just raised $US10 billion in new debt. It could definitely borrow the rest. Benioff started his career at Oracle and still has a mostly friendly relationship with founder Larry Ellison, although the two do throw barbs at each other. Oracle is also trying to build up its cloud business, and recently said it expects to add more than $US1 billion in new cloud contracts this year. This could be a repeat of the hostile-takeover strategy it used to buy PeopleSoft back in 2004.
- Microsoft has $US95.4 billion in cash and short-term investments. Salesforce could help it boost its cloud business, which CEO Satya Nadella has bet the company on, and pull through tons of sales of Office 365, its online productivity suite (email, document creation and sharing, and so on). Salesforce CEO Marc Benioff tweeted from Microsoft’s BUILD conference this morning, and the companies have been teaming up a lot recently.
- Google? This is a long shot, but Google’s enterprise business is a small yet fast-growing part of the company, and it’s going to need new product lines as its core advertising business slows. Salesforce’s cloud-centric focus is a perfect match for Google, which has always been focused on delivering everything over the web. And Google has $US64.4 billion in cash and marketable securities.
- IBM is yet another old guard company banking on the cloud for its future, and though it only has about $US8.8 billion in cash on hand, it could conceivably line up financing for a takeover. IBM recently said its cloud business is on track to make more than $US7.7 billion this year, but that’s generous — its “as-a-service” business, where customers pay subscriptions for various types of software — is $US3.8 billion. That’s a drop in IBM’s annual revenue bucket, which is more than $US190 billion.
- SAP has about $US5 billion on hand so would have to take on some pretty heavy debt to make this kind of deal. The German giant sells mostly on-premises financial accounting software used by huge companies, but it’s banking on its in-memory database called HANA, which competes more directly against Oracle than cloud companies like Salesforce. Still, buying Salesforce would be a quick way to up its relevance in the cloud.
There could also be other long-shot candidates outside the tech industry. But the company’s valuation seems high (and rich versus earnings) for a private equity firm, so it seems like if the rumour’s true it’s much more likely to be coming out of the tech world.
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