Microsoft Thinks Salesforce Is Too Costly to Acquire: Report

A new report throws cold water on the prospect of an audacious Microsoft-Salesforce deal any time soon. But Microsoft is busily growing its business cloud ecosystem.

Microsoft not buying Salesforce

Contrary to an earlier report, Microsoft may not be considering a bid on cloud sales and customer service software giant

Microsoft currently considers Salesforce too pricey, but the company may be open to a deal in the long term, according to a late-day May 7 Reuters report citing two unnamed sources familiar with the matter. Salesforce is the leading CRM company, with a market valuation of nearly $49 billion. "Salesforce's shares, which have risen 48 percent in the last 12 months, trade at 106.8 times the company's forward earnings, well above Microsoft's multiple of 19.1," noted the report.

Earlier this week, rumblings of a possible buy surfaced after BloombergBusiness reported that Salesforce had landed on Microsoft's takeover radar after the former was approached by a potential buyer in April. German business software provider SAP denied being in the running while Oracle declined to comment.

Salesforce CEO Marc Benioff spent a 13-year stint at Oracle and is considered a protege of co-founder and former CEO Larry Ellison. Although the two companies have been bitter rivals at times, Salesforce's platform relies heavily on Oracle's database technologies. In 2013, the companies signed a 12-year pact to maintain the relationship.

Last year, Microsoft and Salesforce entered into a strategic partnership linking Office 365 with the latter's CRM cloud. "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.

Meanwhile, Microsoft is busily growing its own business cloud ecosystem and reaping the rewards. The Redmond, Wash., company's commercial cloud sales rose 106 percent year-over-year during the last quarter (the fiscal 2015 third quarter) on increasing demand for products like Microsoft Dynamics CRM Online and Office 365.

Dynamics alone is "nearly a $2 billion business," revealed Nadella during an April 23 earnings call. Microsoft's commercial cloud now has an annualized revenue run rate of $6.3 billion. "Dynamics CRM online enterprise paid seats more than doubled year-over-year, and we more than doubled enterprise seats sold this quarter for ERP," he continued.

To keep the momentum going, Microsoft released the Dynamics CRM Online Spring 2015 update, forging deeper ties between the cloud-based CRM software platform and Office, the company's flagship productivity offering. New features include the ability to access and modify CRM data directly from Outlook, OneNote support and new mobile apps for iPhone, Android and Windows Phone. The update also kicks off the integration of Parature's social-enabled, self-service customer support capabilities with Dynamics CRM. Microsoft acquired the cloud software provider in early 2014.

Bob Stutz, corporate vice president of Microsoft Dynamics CRM, said in a statement that his company continues "to unlock the potential of business productivity with solutions that work seamlessly together, leveraging familiar tools that sales professionals already prefer to use. We are now making it even easier to deliver personalized customer experiences using contextual customer information, anywhere, anytime, from any device."

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 network of...