Salesforce Buyout: My Speculation
1
If you are reading this you don’t need to be directed to an article explaining what happened: Bloomberg said that (somehow) it leaked that Salesforce had retainer investment bankers to help them evaluate a potential acquisition or buyout.
Of course, this meant it was open season for everyone to add fuel to the fire, blood to the feeding frenzy, or — whatever else you add to something else to make it more intense.
Of course, these are all speculations – so I decided to add my 0.0015 drachmas to the affair and add my speculation.
Caveat: unlikely I can add a name to this that has not been mentioned (and that has a chance to happen).
Caveat2: I am not privileged to any information that is not public – so take it for what it is… pure speculation.
Caveat3: you still reading? Good… here we go.
Scenario 1: The PR Confabulation
It would be unfair or illogical to assume that SFDC has not had its fair share of M&A over the years – both before and after going public. It would also be unfair to Marc Benioff and its board to say that any of those attempts had more than a passable chance at becoming reality.
Why mention the M&A attempt and the search for advisers this time around?
Some people out there are speculating that is part of a PR effort to shore up the value of SFDC and to promote Marc Benioff’s name before a commitment to start a career in politics. Some people infer that this time is the right price / contender combination to make it a sizable event that must be reported before it leaks (you know how fast things leak in SF and Silicon Valley – see Yammer/MSFT for reference).
While there is a certain, minor, potential for this to be true I cannot see a PR campaign being made out of this. True, Mr. Benioff has been more cozy in taking political positions lately and the remarkable coverage of all the philanthropic efforts he takes part of is growing – but I don’t think he needs this to shore up his name – or his company name.
As I discussed yesterday with a well-known CEO of a competitor – everybody in the known world either has or is considering having an instance of SFDC software in their company. They are well known.
Chance of this scenario being the one: less than 5 percent (there are some crazy PR people out there, after all)
Scenario 2: All’s Well That Ends Well
With due apologies to Murphy Brown writers (look it up, trust me) nothing will happen at the end.
As I said before, many talks have happened and many offers have been made – and this may be the most logical, or (as some say) predicted one, or closest to the mark, or even the only one that the board would seriously consider… but that means it means to be made public to minimize the carnage at a later time for someone’s stock or private cash stash.
Independently of that, nothing’s going to happen – but its a significant possibility that must be advertised or leaked or whatever was done to it.
Chance of this scenario being the one: less than 10 percent
Scenario 3: Everybody Needs Somebody (sing it!)
There is a not-zero possibility that an acquisition is going to happen (and given SFDC’s inability to keep a secret in its history – trust me on this) and they will be acquired.
But whom?
Plenty of speculation has already happened in the Internetz and the Twitterz – will let you find it. My take? Glad you asked.
Three potential suitors (and some not-so-potential) in order of likelihood:
IBM – yes, those guys.
They have been shrinking their businesses and they need a way to get into cloud. Bad. In spite of whatever magic mushrooms they consume to say their cloud businesses are near $15BB – they are not a player in cloud. This will give them “cloud creed” and an incredible entry point into enterprise software. It will also allow them to take a $5-6BB business and easily double it over the next couple of years by letting their consulting and outsourcing LOB go at it.
There is the question that emerges quickly here, given their recent relationship, what about SugarCRM?
When the relationship between them was first announced I had the chance to talk to an IBM executive about that potential. He said, paraphrasing, that IBM does not make acquisitions that yield less than billion dollars in return – and they could not see SugarCRM getting to that level.
Should I remark that Salesforce is already there? And then many times over?
There is a lot of upside for IBM to enter this market with this acquisition… only downfall? they would need to cut through the many layers of bureaucracy to make the right people agree. And any IBMer would agree that is not a small task (the smart joke would be that they wanted to acquire SFDC when they turned $1BB in revenues but just not they were able to get it together… hehehe – I am not smart humor).
Oracle – Yes, Benioff’s former boss and fist investor (well, not the company but the chairman) and a vendor with a desperate need for “cloud creed”.
In spite of their marketing prowess, Oracle has nothing that resembles a modern cloud investment. They bought old, outdated, and (pardon the french) crappy software and never really updated. The customer attrition rate at some of the properties the acquired has crossed the 50% range (meaning that more than half the customers at the time of the acquisitions are already gone) and the revenues they expected are nowhere near what they should’ve been.
OMG could they use some cloud creed. Quickly being left behind and without even a simple sleigh-of-hand like HANA is for SAP they need to make a statement.
The rumor / conspiracy theory states that when Benioff left Oracle Larry made a pact that he would acquire SFDC at a later time for Marc to come back as CEO. If true, and the likelihood is minuscule, what a master plan (as someone said earlier on twitter)! To plan to lay low for 15 years like a Enterprise Software Disruption Sleeper Cell and pounce at the right moment (when Larry wants to retire). Incredible and very, very difficult to pull off.
If you seriously consider this to be possible you have short term memory (or lapses in memory). Oracle has, by any count, a sizable command of the CRM market. Remember: they acquired PeopleSoft, JD Edwards, and (fanfare here) Siebel – the King of CRM. By magic and marketing they lost very few Siebel customers over the years and they have done a good marketing effort at keeping them past two years.
The part where your memory may not work well – the FTC investigated (and I do mean investigated) that deal in detail and barely, barely concluded there was no collusion or monopoly at that time. At that time.
With the changes in market share and the sizable command SFDC has of the market? Highly unlikely that would happen. Then again, I am not the FTC (although for the record, when everyone said it would not be allowed last time I said it would – and won some sizable bets in the process :)).
Microsoft – The partner.
With the recent partnership still fresh in some minds, there is a likelihood (and by market cap, a better suitor than the past two) but – and this is a very short analysis – as gun-shy as they are following their Yammer debacle (although there is some value in this deal – not so much on that one) and the ill-fit into the one-microsoft owning the world strategy (unless they want to compete with Zoho.com – which frankly, I don’t see it) makes it hard to visualize.
Stranger things have happened, I did mention the Yammer acquisition – right?, but even then – unlikely that it is worth their time.
Then there is the issue of technical fit — we are not going there as far as integration of SFDC technology into MSFT technology. Let’s leave that dog alone…
Others – Many
Cisco, Hewlett Packard, EMC, BMC, CA, and some others I can’t remember.
Yes, everyone needs to get into the cloud – and everyone needs to do this now (we can have the discussion about the obscene dollar amount allocated by organizations to “buy cloud” in the next two years in a separate post).
However, most of these people don’t have the capacity to absorb and grow the potential of SFDC.
Will not speculate more than that.
Your turn – what / who / why / when / and how do you think this ends?
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