(Investor’s Business Daily)
Salesforce.com (CRM) is reportedly in talks to acquire Slack Technologies (WORK), a maker of workplace collaboration software, as both face more competition from Microsoft (MSFT). Slack stock popped on the news while Salesforce stock fell Wednesday.
Word of the possible merger first was reported by the Wall Street Journal. The news sent Salesforce stock down 3% to near 253 on the stock market today.
A growing appetite for acquisitions has been a drag on Salesforce stock. The enterprise software maker acquired Tableau Software for $15.7 billion in an all-stock deal in 2019.
But Slack stock soared 24% to near 36.60. Slack is set to report October-ended quarter earnings on Dec. 2.
Growing competition with Microsoft has been an overhang on Slack earnings since its direct listing in June 2019. Microsoft Teams tools and Slack’s chat software aim to replace email.
Slack Stock: Previous Approach From Microsoft
Microsoft approached Slack in 2016 about an acquisition but backed off. Instead, Microsoft chose to build up its Teams collaboration software. Amid the coronavirus, usage of Microsoft Teams has surged for videoconferences.
Microsoft offers Teams tools for free as part of its online Office 365 product, noted Oppenheimer analyst Tim Horan in a recent note to clients.
“Microsoft is clearly the juggernaut in cloud-based business communications,” Horan said. “The number of Teams daily active users has swelled to 115 million in November, driven by a surge in cloud adoption as more people work remotely. This dwarfs Slack’s 15 million daily active users.”
Horan added, “Microsoft has bundled collaboration services for free into Office 365 tiers, with higher-level tiers including telephony and more video meetings capabilities. In response, Slack has filed an antitrust complaint in the European Union describing this behavior.”
Salesforce Stock: Facing More Competition From Dynamics
Salesforce, meanwhile, also faces more competition from Microsoft’s Dynamics unit in the customer relationship management software market, analysts say. Microsoft has been putting more salespeople behind the Dynamics business.
Wedbush analyst Daniel Ives says a Salesforce-Slack merger would put pressure on Alphabet’s (GOOGL) Google to make an acquisition.
“This would also have a ripple impact for Google and its cloud endeavors and put more pressure on (cloud computing Chief Executive Thomas) Kurian to do a collaborative cloud deal over the next three to six months to keep pace,” Ives said in his report to clients.
Slack stock has underperformed in 2020. Prior to Wednesday’s gain, Slack stock owned a Relative Strength Rating of only 52 out of a possible 99.
Slack in September said it had 130,000 paid customers, up 30% from the same month the previous year.