A Microsoft-Salesforce Deal May Be on the Horizon

Microsoft is reportedly interested in acquiring cloud business software giant Salesforce.

Possible Salesforce acquisition

Microsoft may be ready to dig deep into its war chest to snap up San Francisco-based Salesforce.com, the market-leading cloud customer relationship management (CRM) software provider.

The Redmond, Wash.-based technology giant is mulling a bid for Salesforce, according to a May 5 report in Bloomberg, potentially setting the stage for a blockbuster acquisition. Salesforce currently has a market cap of nearly $47 billion.

A deal could potentially result in a major expansion of Microsoft's corporate cloud customer base.

During a Feb. 25 earnings call to discuss his company's fiscal 2015 fourth-quarter results, CEO Marc Benioff said Salesforce is the "fastest software company to reach $5 billion" and is well on its way to surpassing $6 billion. Salesforce is "now the sixth largest software company in the world, the No. 1 cloud computing company in the world," he said.

Keith Block, president and vice chairman of Salesforce, noted that sales to enterprise customers had accelerated during fiscal 2015. The company "closed nearly 550 seven- and eight-figure transactions," approximately 100 more big-ticket transactions than the previous year. "In fact, the number of eight-figure transactions in FY15 increased by 33 percent from a year ago," he said. "No other cloud computing [company] is closing transactions like these, of this size and this scale and this volume."

Microsoft's interest was piqued after Salesforce was approached by another buyer in April, said the report. When approached by the financial news outfit, SAP denied pursuing a bid and Oracle declined to comment. Sources close to the matter indicated that any possible deal is in its earliest stages, as Microsoft and Salesforce haven't engaged in acquisition talks, said Bloomberg.

Salesforce has reportedly retained the services of two investment banks to respond to overtures from other companies. Among the Salesforces options are fielding bids or continuing to go it alone.

Microsoft and Salesforce are rivals in the growing and increasingly competitive cloud software market. Salesforce specializes in CRM software used by sales organizations and customer service and support providers. Microsoft competes with its own Dynamics Online product along with a wide range of cloud-enabled software offerings.

Last year, the companies grabbed headlines when they announced a strategic partnership that would link the Windows and Office ecosystem with the Salesforce platform and bring in Microsoft's SQL Server as the database foundation for ExactTarget, a cloud marketing company acquired by Salesforce in 2013 for $2.5 billion.

"The simple truth is that we wanted to bring more value to our mutual customers, and be each other's customers in relevant areas," said Microsoft CEO Satya Nadella during a conference call describing his company's "coopetitive" strategy at the time. Benioff cited customer demand for Office-Salesforce interoperability as a key driver behind the deal.

"They want this partnership badly," said Benioff. "They want to be able to work with Office 365, they want to be able to work with Excel, with Outlook, they want to work with all of Microsoft's apps, and they want to be able to work with Salesforce."

Pedro Hernandez

Pedro Hernandez

Pedro Hernandez is a contributor to eWEEK and the IT Business Edge Network, the network for technology professionals. Previously, he served as a managing editor for the Internet.com network of...