Why on earth would Microsoft bid $55 billion for Salesforce.com?

Why on earth would Microsoft bid $55 billion for Salesforce.com?

Acquiring companies can be the easiest way to gain marketshare sometimes in the tech world, and Microsoft is a shining example of how this works. So far, in 2015 Microsoft has purchased Datazen, LiveLoop, N-trig, Sunrise, Revolution Analytics, and Equivo mostly for their technology such as Stylus tech, analytics, and business intelligence. However, last year Microsoft acquired many companies in order to reach new customers; two big names are Acompli and Mojang. These two companies made sense to acquire because they held a position in the market of mobile email apps or computer gaming where Microsoft wanted to be.

Unlike these acquisitions, SalesForce was going to be the biggest purchase by a long shot. As far as we have record, the largest amount of money Microsoft has spent on a company was when they bought Skype for 8.5 billion dollars. According to CNBC, Microsoft bid $55 billion and Salesforce turned them down! Understanding the type of customers that Salesforce tends to be popular with can bring clarity to such a high price. Most companies are popular with a single size range of companies. This is not the case with Salesforce though, and in fact according to reviews by TrustedRadius, Salesforce ranked highest with large, medium, and small businesses.

Reaching customers means unlocking more potential future sales and when a company sells a product that covers nearly all sizes of businesses this company holds very high value. Microsoft understands the potential revenue that Salesforce could bring, but there are also a few major hurdles making the deal less than ideal for Microsoft. One such hurdle involves how Salesforce currently does not use Microsoft Azure as their backend. Another issue could be Microsoft already has a CRM product called Microsoft Dynamics, and this means there will be loss due to redundant business units and they may either combine or coexist.  We’ll see if anything comes of this deal but for now it seems negotiations need to continue.

Share This
Further reading: , , ,