Salesforce is buying workplace messaging app Slack for $27.7 billion, marking the largest acquisition in the San Francisco-based cloud-based company’s history.
Under the terms of the agreement, Slack (WORK) shareholders will receive $26.79 in cash and 0.776 shares of Salesforce stock per Slack share. Salesforce (CRM) announced the deal Tuesday in conjunction with its earnings release for its third quarter of fiscal 2021.
The move will allow Salesforce (CRM), which sells cloud-based customer relationship management software and other enterprise applications, to bolster its business offerings. The company, launched in 1999, was ranked 240 on Fortune 500’s largest US companies by revenue list in 2019.
Slack’s stock was down less than 0.5% in after hours trading Tuesday. Salesforce shares fell more than 4%.
Salesforce on Tuesday posted third quarter revenue of $5.42 billion, up 20% from the same period in the prior year, and diluted earnings per share of $1.15. The results beat analyst expectations, but revenue growth slowed compared to the two earlier quarters in this fiscal year.
The company raised its revenue guidance for the full 2021 fiscal year to approximately $21.10 billion to $21.11 billion, which would mark a year-over-year increase of about 23%.
The company also announced the retirement of Chief Financial Officer and President Mark Hawkins, who will leave his role on January 31 and transition to an advisory role as Salesforce’s CFO emeritus through October 2021. He will be replaced by Amy Weaver, who is currently Salesforce’s president and chief legal officer.
The Salesforce-Slack deal
Launched in 2013,Slack is a workplace communications tool popular among tech companies, media firms and retailers — it is used by Amazon (AMZN), IBM (IBM), TD Ameritrade (AMTD) and others, including CNN. It’s been an especially strong year for the company, with its stock up more than 59% since the beginning of 2020, as businesses scrambled to manage remote teams.
In June, Slack CEO Stewart Butterfield told CNN there is still uncertainty around its growth, especially as businesses pull back on spending: “Existing customers are using Slack more. Individual users are using Slack at a greater percentage of their day … But at the same time, when [our customers] feel pain, we feel pain.”
In its most recent quarterly earnings report in September, the company reported more than 130,000 paid customers, up 30% year-over-year. Slack does not regularly report its daily active users, but said in the fall of last year that it had reached more than 12 million daily active users.
However, Slack has not turned a profit since its initial public offering last year.
The acquisition will position Salesforce and Microsoft, with its Teams chat platform, as closer competitors in the remote collaboration space.
Because Teams comes bundled with Microsoft’s Office products often used in the workplace, it has seen significant growth as more people work remotely. CEO Satya Nadella said Teams’ grew to 75 million daily active users by the end of April, up from 44 million from mid-March. In October 2019, the last time it reported this specific metric, Slack said it had 12 million active daily users.
An acquisition from an enterprise software and services giant like Salesforce could help accelerate Slack’s user growth even more.
“Stewart and his team have built one of the most beloved platforms in enterprise software history, with an incredible ecosystem around it,” Salesforce CEO Marc Benioff said in a statement. “Together, Salesforce and Slack will shape the future of enterprise software and transform the way everyone works in the all-digital, work-from-anywhere world.”
Last year, Salesforce acquired data analytics firm Tableau Software for $15.7 billion, to help companies better visualize their data, and previously bought Mulesoft, a software company that connects different systems together, for $6.5 billion.
The deal is expected to close in the second quarter of Salesforce’s fiscal year 2022, subject to approval by Slack shareholders and regulators.
Read from source: https://edition.cnn.com/2020/12/01/tech/saleforce-buys-slack/index.html
