Larry and Marc - Reunited, and it feels so Good (at $75 a share?)
Feb 11th, 2008 by Martin Schneider
Just saw on TechCrunch that Salesforce.com might be shopping itself to Oracle for $75 per share. Hmmm…
On the one hand, this deal seems excessive - a 50% premium? But as I’ve seen inSaaS M&A in the past - a 5 or even 10x earnings number is common for an offer price. So, we are not seeing Salesforce.com ask for the world here. But, we also haven’t seen a SaaS apps deal of this kind of size yet (I don’t really consider WebEx a SaaS apps play… yet). So it is groundbreaking.
I am more interested in the timing of this rumor (and right now, that is all it is). Salesforce.com has done an exceptional job of keeping most investors bullish on its stock and overall business model for the past few years. But it’s stock has dropped a bit (though the market in general is not kicking ass right now), though nothing to go into panic mode over. So, why would Salesforce.com pull the trigger now?
I think Salesforce.com, ultimately, is built on an outdated model (not just outdated infrastructure). The typical software arc is around 10-12 years…and we know how old Salesforce.com is right now. Mr. Benioff is no fool, and realizes that the company has been able to build a great top line, but with very little bottom line value over the past decade or so. The Street might be happy with this type of revenue numbers - but customers and partners might take issue with the lack of true investment in the product. Salesforce.com has been a major marketing machine - but little of the revenue has gone back into R&D. That combination equals an eventual decline - in customer satisfaction followed by revenues , and when there is little profit margin to be had - disaster can follow very shortly.
We all saw what happened with Siebel - and where did it wind up? Under Larry’s roof as well.
As a competitor to Salesforce.com, I couldn’t be happier with a sale to Oracle. Since we have seen how well CRM companies fare after being integrated into that fold…
Did you see my post on the subject matter? More of a developer spin, but the link I referenced was pretty interesting. I posted here: http://developers.sugarcrm.com/wordpress/?p=71
Tom Foremski’s had me in stitches with this gem on Benioff:
“-Mr Benioff needs a new challenge, he appears to be losing interest in Salesforce, or at least reducing his financial interest in his company at a rapid daily rate. He has been selling 10,000 Salesforce shares every single day since 21 August 2007. Before then, he sold 20,000 shares every day since 14 November 2006. Prior to that date, Mr Benioff sold thousands of shares every day in variable amounts since 31 July 2006.”
PULLLEASEEE… Can anyone not read between the lines on this? My speculation is that Benioff knows that he’s sitting on a ticking time bomb and SFDC is totally over valued. I mean seriously, take a look at the P/E Ratio for SFDC?! And of course, now the CRM ticker is up from close over the weekend.
It would be awesome if Oracle pulled a Yahoo! and turned down SFDC. Oracle has built a brand that doesn’t need an overprice SFDC brand as apart of their portfolio. Given Sugar’s impressive trajectory, its only a matter of time before an Oracle+SFDC mashup will have to compete with an CRM app that runs on their db product.