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02 Dec 2020
3 min read

Salesforce to Buy Slack for $28 Billion

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Written by OspreyFX News Team

Salesforce to Buy Slack for $28 Billion

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Key Takeaway

  • Salesforce takes over Slack
  • Disappointing results for Slack reported for two quarters

Salesforce, the giant CRM platform, and cloud software company, has agreed on a deal to purchase the business communication platform, Slack, for nearly $28 billion. The cash and stock deal worth $27.7 billion is the largest in the cloud software industry and even beats Microsoft’s takeover of LinkedIn four years ago, a deal worth $26.2 billion in 2016. The deal is also the second-largest software merger following the acquisition of Red Hat by IBM in late 2018 for roughly $34 billion.

The big purchase is important for several reasons. The merger creates a cloud giant that can compete with Microsoft for the leading position in what is now one of the most rapidly growing sectors of the tech industry. The combination of Slack’s chat and workplace services with Salesforce’s wide range of sales and marketing platforms will provide an easier way for employers and workers to become acquainted with the business software solutions provided in Salesforce. The acquisition will give Slack the needed boost and resources to build better and faster software so that it can take on Microsoft Teams, Microsoft’s business communication platform, heavily promoted during the pandemic.

Slack investors will receive the equivalent of $45.86 per share, which includes $26.79 in cash and 0.0776 shares of Salesforce, the company said in a press release. Slack co-founder and CEO Stewart Butterfield will continue to lead his company as an operating unit within Salesforce once the transaction is officially closed in the second quarter of Salesforce’s fiscal year 2022.

The initial intended role for Slack was to be the new interface of the Salesforce Customer 360 software, a platform that collects a company’s customer information in one place.

Sub-Optimal Performance for Slack

Slack was founded in 2009 and hasn’t exactly been having a smooth ride so far. As more employees shifted to a work-from-home model this year due to the pandemic, Slack’s app has not enjoyed a significantly growing number of daily active users or revenue growth. In its recent earnings, the company reported two-quarters of disappointing results, as the third-quarter results showed that the company has missed the strong rally seen by other workplaces software companies such as Zoom and Microsoft’s Teams service. The third-quarter results came with reported revenue of $234.5m, up 39% year-on-year. In comparison, total revenue reported by Zoom for the same period jumped by $777.2m, up 367% year on year.

Salesforce, on the other hand, is currently the global leader in CRM, valued at over $200 billion. Shares of the company slid on the release in the after-hours trading by over 1.80%. Salesforce pioneered the software-as-a-service industry but hasn’t yet grown to the top tier level of Big Tech alongside the names of Microsoft and Amazon Web Services.

As the pandemic altered the way in which companies do business and operate internally, the tech space saw an increased interest in platforms that allow remote work and facilitate workplaces without physical offices.