Shares of salesforce.com jumped 1.6% yesterday, amid speculations of a potential takeover by Microsoft. Meanwhile, no official announcement has been made by either company. Salesforce is currently working with two investment bankers, after being approached by prospective buyers. Microsoft shares lost 1.3% yesterday, and decreased over 3.2% in the last five days.
Earlier, analyst from the research firm, Credit Suisse, cited that the potential companies who would show interest to acquire Salesforce would be Google Inc (NASDAQ: GOOGL), Microsoft Corporation (NASDAQ: MSFT), SAP SE (ADR) (NYSE: SAP) and Oracle Corporation (NYSE: ORCL).
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However, SAP and Oracle Corporation reported that they are not interested in a bid for Salesforce. Meanwhile, Google is expected to be a potential bidder for Salesforce, according to Philip Winslow, the analyst from Credit Suisse. Winslow said that salesforce can provide Google a huge “installed base of enterprise applications”. However, the analyst noted that Google previously sought to acquire companies with huge talent and strong engineering capabilities, while salesforce might not be able to offer such qualities.
Why Microsoft, and how will it benefit
Salesforce accounts for 16% market share in the customer relationship management market, while Microsoft holds 7% market share, based on Gartner reports. Integrating Salesforce products into Microsoft would help Microsoft to increase its market share in several software verticals, through Microsoft’s Windows Enterprise, Azure and other software-as-a-service products, says Alex Cho, an analyst from Seeking Alpha.
Microsoft CEO, Satya Nadella is shifting Microsoft’s strategy to cloud and mobile software provider, and is even open to work with competitor’s products. Last year, Microsoft and Salesforce has reported their partnership for joint solutions which includes Power BI for Office 365, Excel integrations with Salesforce and Salesforce1 for Windows.
Microsoft has a strong cash position of $85.4 billion, and Salesforce has a market value of over $45 billion. Satya Nadella has previously headed the Microsoft’s cloud division and will be able to successfully integrate acquisitions of such a big scale. Moreover, his openness to work with competitors and turn them into partners, has helped Microsoft to scale up its cloud business.
As a result, Microsoft’s cloud business posted a year on year increase of 106% for the quarter ending on March of 2015. Satya Nadella expects the firm’s cloud business to reach $20 billion in 2018, as compared to the present annualized rate of $6.3 billion.