Why Salesforce wants to slurp up Slack
Our mission to make business better is fueled by readers like you. To enjoy unlimited access to our journalism, subscribe today.
Salesforce is eyeing what could become its biggest-ever acquisition: Slack, the workplace instant messenger.
The two tech companies recently held talks about a deal whose value would likely top $17 billion, the Wall Street Journal reports. That figure represents Slack’s market capitalization in recent days—before M&A rumors sent the stock surging almost 25%, causing stock markets to halt trading of its shares, on Wednesday.
Neither Salesforce nor Slack responded to Fortune’s request for comment.
Why would Salesforce be interested in Slack? Marc Benioff, Salesforce’s billionaire founder and CEO, clearly wishes to build his business into something greater than just a purveyor of software for managing customers and sales leads, the company’s bread-and-butter money-maker. He wants to build a platform—that word Wall Street-wooing techies love—to accommodate all offices’ computer-based needs.
Slurping up Slack would expand and deepen Salesforce’s virtual hooks into workplaces. Slack’s chat app is a sticky piece of software that has essentially become an operating system on which offices run, enabling integrations with all sorts of other tools (including Salesforce’s). Like Amazon continually adding new perks for Prime subscribers—same-day delivery, exclusive music, Whole Foods discounts—Salesforce is looking to offer an ever-more compelling bundle—one that might, it hopes, rival Microsoft.
There’s the rub. For years Salesforce has been setting itself on a collision course with Microsoft over the fast-growing and highly lucrative “cloud” market. At the end of 2009, Salesforce bought GroupSwim, a company it turned into Chatter, basically a Facebook for the workplace—quite like Microsoft’s Yammer. In 2016, Salesforce brought onboard Quip, a phone-first word processor positioned as a competitor to Microsoft’s Office suite. Taking up Slack, which been fending off the encroachment of Microsoft Teams for three years, would further enflame the long-brewing rivalry over in-office software.
Daniel Ives, an analyst at Wedbush Securities, calls the Salesforce’s possible Slack purchase “an aggressive move” that would be “a major shot across the bow at Microsoft.” A deal could, he writes, “set off a chain reaction for more cloud software deals in 2021 despite the run-up in valuations over the past nine months,” largely due to a booming tech rally lofted by the pandemic forcing people to work from home.
Microsoft is the playing the long game too. In addition to battling Slack with Microsoft Teams, it has got Dynamics, its own Salesforce-fighting customer-relationship management software. But as the number two cloud-computing business behind only Amazon, Microsoft has less to worry about than Google, which may be provoked by Salesforce’s swaggering to make a bold bet on collaboration software of its own in the coming months.
Ultimately, Salesforce’s Slack courtship can be viewed as analogous to Pepsi snapping up energy drinks, bottled water, and snack foods in a bid to take on perennial nemesis Coca Cola—which in Salesforce’s case is Microsoft. And just like the carbonated soft drink industry, the cloud-collab market—riding work-from-home highs—is plenty bubbly.
More must-read tech coverage from Fortune:
- Who’s liable when a self-driving car collides with another vehicle?
- The cashless economy: How fintech is approaching the future of finance
- Facebook’s latest efforts to combat hate speech aren’t enough, ADL says
- There’s more 5G available in big cities. But which carrier is fastest?
- How to succeed in the subscription business