Verizon (VZ), AT&T (T), Comcast (CMCSA) don’t want to be “dumb pipes” that supply Internet connections but that see the bulk of revenue from Internet customers go to the streaming companies that sell content to subscribers. So they’re in a race to buy content companies so they can build their own streaming services.
The same thing is going in the the Cloud sector. Nobody–not Alphabet’s Google, not Microsoft (MSFT), not Amazon (AMZN)–wants to be just a “dumb pipe” seller of Cloud storage and hosting.
So right now in the Cloud space, we’ve got a race comparable to that in the Internet service and streaming space, to add serviced like advanced data analytics that will help companies manipulate their data rather than just host it in the cloud.
Today, Salesforce.com (CRM) agreed to buy Tableau (DATA) in an all stock deal worth about $15.7 billion.
This follows on Google’s deal to buy Looker last week for $2.6 billion and Microsoft’s (MSFT) 2016 acquisition of LinkedIn for $26 billion. (Salesforce had been looking to acquire LinkedIn before Microsoft acquired the company.) Salesforce’s largest previous acquisition was MuleSoft in 2018 for $6.5 billion.
The deal continues Salesforce’s evolution from customer management software toolset into a Cloud-based company, and pushes it further into competition with Microsoft, Amazon, and Google in the cloud analytics space.
Salesforce sees the deal this way:“We are bringing together the world’s #1 CRM with the #1 analytics platform. Tableau helps people see and understand data, and Salesforce helps people engage and understand customers,” said Salesforce chair Marc Benioff. (And, as if to symbolize the heated competition with Amazon (the #1 Cloud company) and Microsoft, Salesforce has announced that it will open a second headquarters in Seattle. Salesforce’s current headquarters is in San Francisco. Tableu is headquartered in Seattle.
Tableau has about 86,000 business customers for its analytics services, including Charles Schwab, Verizon, and Netflix. Tableu’s data analytics would seem to be a good mesh with Saleforce’s Customer 360 product that promises to slice and splice data to give customers a “Big Picture” of their information. Tableau has recently been struggling against Microsoft’s moves in this sector.
Salesforce is a member of my Jubak Pick’s Portfolio. The stock is up 11.33% as of the close on June 10 from my purchase price on November 1, 2018. The shares closed down 5.26% to $152.79 today after Salesforce said the acquisition would dilute earnings per share going forward. Wall Street analysts also noted that the deal was a tacit admission that Salesforce’s own analytics product Wave was a flop. Analysts also worried that the deal was an admission that growth was slowing in Salesforce’s core market. And they also noted that at 13 times Tableau revenue the deal is very expensive. Salesforce.com does trade at a price to earnings ratio of 104 so there’s no room here for flagging growth (and since the deal was in stock, Salesforce paid in a highly valued currency.)
