Opinion: Salesforce may view Microsoft as the anti-OracleMay 4, 2015 | By Fluent
Published on 5/1/15
If investors are looking for any clues as to which giant tech company may be courting Salesforce.com Inc., one could look to a big developer conference that took place this week in San Francisco.
That would be the Microsoft Build Developer Conference, where SalesforceCRM, -2.53% CEO Marc Benioff was in the audience during Microsoft Corp.MSFT, -0.28% CEO Satya Nadella’s keynote. Both Benioff and Nadella mentioned each other’s companies in recent tweets, and were reportedly at a dinner Tuesday night with some other tech CEOs, ahead of the Build conference.
While the two companies compete in some arenas of cloud computing, they have been in a partnership since October. Benioff was ostensibly at Build to tout their products working together.
But with Salesforce shares spiking after Bloomberg reported Wednesday that the cloud-computing company was working with financial advisers after being approached by a buyer , investors are trying to figure out which tech company may be the one courting Salesforce to do a deal.
Some on Wall Street believe that Oracle Corp. ORCL, +0.86% is the more likely suitor of Salesforce, given Oracle’s push in the cloud and its ties to Benioff (a former Oracle executive). But even though Benioff may have learned much from Oracle co-founder Larry Ellison during his time there, in many ways he has tried to make Salesforce in a different vein from Oracle.
“Will the Empire and Rebel Alliance Finally Unite?” asked Tom Roderick, an analyst with Stifel Research, in a note Thursday, referencing the two main enemies of the “Star Wars” movies. Roderick noted that Benioff would probably not want to do a deal with Oracle, “unless said merger allowed him to take command of the combined entity.” Rob Enderle of the Enderle Group believes Benioff would be an ideal successor to Oracle’s Ellison, now chairman, with Mark Hurd and Safra Catz as duel CEOs running the company.
For one, Benioff has instilled Salesforce with a sense of philanthropy. For example, employees are entitled to six days of paid time-off for volunteer projects of their choice. He and his wife also donated $100 million to the University of San Francisco to build what is now the UCSF Benioff Children’s Hospital and another $100 million last year, split by that hospital and Children’s Hospital Oakland.
Benioff has been an outspoken advocate for more philanthropy by Bay Area tech companies, especially in San Francisco where the tech bubble and soaring real estate prices are to be blamed for the exodus of many long-term residents from the city, including the shuttering of many family-owned businesses hit with evictions by new building owners.
In contrast, Oracle co-founder Ellison is known for bringing the elitist Americas Cup yachting race to San Francisco, which disappointed in terms of its economic impact on the city. San Francisco ultimately lost money from hosting the Americas Cup, in part because fewer teams took part in the race, which Ellison’s Oracle Team USA won.
Oracle is also known for its hard-driving, sales-focused corporate culture, one that could be a tough meld with Salesforce employees. And in software, where employees are the key asset, any deal that could wreak havoc on a workforces would be ill-advised.
It’s also highly possible that Oracle does not want to do such a mammoth deal, with Salesforce valued at just under $50 billion, based on its closing price of $72.82 on Thursday. At an Oracle Media Day on Thursday at its Redwood Shores headquarters, co-CEO Catz told reporters that Oracle would benefit if another company bought Salesforce, because “it would cause a lot of disruption in the market.”
Would Microsoft be a better fit, if indeed the companies are even discussing such a huge deal? Microsoft too has an entrenched cumbersome corporate culture, but CEO Nadella is trying to change that. And since he took the helm in early 2014,Nadella has focused on ushering Microsoft further into cloud computing.
Microsoft definitely has enough cash to work with, totaling, including short term investments, $95.4 billion in the most recent quarter. And for all Microsoft’s efforts in the cloud, the company would have far less overlap with Salesforce in terms of products than Oracle.
“Oracle has pushed very aggressively over the last two or three years,” said Jordan Cohen, chief marketing officer Fluent, a privately held cloud-based marketing company in New York. “They already have an existing powerhouse with marketing and services and also data.” Cohen added that for Microsoft, buying the dominant player in cloud sales software would have an immediate impact. Said Cohen: “They could become relevant, and at the same time stave off Oracle.”
Selling Salesforce at an attractive premium could be a nice exit for Benioff, who may want to focus on philanthropy — a move that would mirror Bill Gates after he stepped down from Microsoft. Gates last year became a tech adviser to Microsoft when Nadella was named CEO.
Still, it may be a bit early for Benioff to rest on his laurels. Even though Salesforce may be San Francisco’s biggest tech company, with one of the city’s tallest skyscrapers in development set to bear its name, the company reported a net loss in fiscal 2015, ended January 3, in part to hefty expenses of $565 million in employee stock options.