After a short and not terribly informative piece on Bloomberg saying that Salesforce had engaged with bankers to potentially evaluate takeover offers, the usual activities ensued. The company’s stock went for a small ride and pundits and prognosticators all began speculating about whom a logical suitor could be and even what the company would be worth on the block. This was not the first time.
I was one of the speculators placing a metaphorical bet on IBM as the suitor followed by Oracle, HP, and Microsoft in no order. They could all use the shine that acquiring this gem would provide. But let me be clear—I don’t believe Salesforce would be acquired in its current state.
The reason is simple—even if a buyer paid a premium on the company’s $50 billion market capitalization it would not be enough because Salesforce’s greatest asset is its future and you can’t put an accurate price on that. So far in its 15 plus year history the company has innovated and helped create markets in cloud computing, social media, CRM, modern platforms, wearable devices, web and mobile computing, and more. Salesforce might go by the ticker symbol CRM but its business is front office business innovation.
All of this is exactly why Salesforce is such an attractive target and precisely why no one will buy them. Large companies, which are the only ones that can afford to be in the bidding, are not hotbeds of innovation. They hang back waiting for markets to prove themselves before swooping in to offer products and services for new niches. Cloud computing is a great example. There’s a famous YouTube video of Larry Ellison at the Churchill Club ridiculing cloud computing as a fad and so much hot air. This was before Larry got religion (and products). Less flamboyant stories can be told of IBM, HP, Microsoft, and SAP—they all waited to enter the market watching Salesforce to ensure it was safe.
Now, of course, they all talk about cloud computing as if they invented it or at least as if they perfected it. Owning Salesforce would give one of their stories great credibility and then you could see a multiplier effect going out to the other innovative areas the company is involved in. But it could also signal the end of a good thing.
I don’t see how you can bring Salesforce into one of those shops and expect it to thrive; the cultures are too different. Salesforce is laid back and takes prudent risks entering new markets as they are forming so as to acquire a first mover advantage. The others? Not so much.
Aside from Apple, I don’t see other companies innovating the way Salesforce does to invent the future. That’s why Salesforce (and Apple) have such bright futures and why buying either company would be detrimental to the tech sector and the economy in general. It would slow or even curtail innovation.
Some might say that if Salesforce ceased to be the innovation engine that it is, that some other emerging companies would have the chance to take its place, that the free market would do its thing and all would be well. I agree with that but hasten to add that it has taken Salesforce 15 years to get to this point and other companies might be able to evolve quicker to fit into one or more of Salesforce’s niches, but it would take time and there’s no guarantee that those other companies would follow the same trajectory.
To make an analogy, if Thomas Edison got kicked in the head by a mule before he invented the incandescent lamp and the modern power grid, we’d likely still have them today along with sound recording and movies and many other things. But it’s hard to see that these inventions would have been as early and if that’s true, what would the last century have been like?
This is all speculation but so is trying to figure out who might be able to afford to buy the company. I’d be surprised if enough shareholders would be prepared to sell and keep in mind that insiders still own a big block. They’re also rich already so it’s hard to see the benefit of selling now rather than letting things evolve as Salesforce’s other endeavors begin to show profits.
(Cross-posted @ Beagle Research Group)