Microsoft Corporation With $95 Billion in Cash, Calls Off Salesforce Deal

Microsoft Corporation

Microsoft Corporation has $95 billion in cash, but the company has still called off negotiations. Microsoft Corporation and Salesforce.com Inc were negotiating a huge deal which would involve Microsoft purchasing the technology firm. Negotiations fell through in that the two could not agree on a price. Microsoft was prepared to offer $55 billion for the company, but Reuters stated that Salesforce’s chief executive, Marc Benioff, wanted at least $70 billion. Amazon and Oracle Corporation are also expected to be making bids in the near future.

Salesforce, which is based in San Francisco, California, stock shares have rose to four percent while shares for Microsoft Corporation have fell to one percent. The chief executive of Microsoft, Satya Nadella, stated in an article for CNBC that this deal is too huge and too risky for the company to put out that much money. Salesforce is considered to be a stellar company that is known for its exceptional brand and distribution and Microsoft considered it to be a company that would fit in well within its ecosystem. Salesforce is a leader in customer relationship management on a global scale and it is estimated to be worth $23 billion each year.

Microsoft Corporation did not drop out of the deal due to insufficient funds. The company has $95 billion in cash and other equivalents so the money is there, but ultimately Microsoft does not wish to spend quite that much on this deal. The CEO of the Microsoft Corporation said it was the sheer price that made him hesitant to finalize the deal not the high price. Salesforce is doing extremely well with a revenue expected at $7 billion and the company earned $1.5 billion in its first quarter alone. It is successful in the market of cloud computing and this is why companies are lining up to make bids on it such as Oracle, IBM, SAP, and Amazon.

Salesforce was founded by Marc Benoiff in 1999. He had formerly been an executive for Oracle. The company went public in 2004 and was able to raise $10 million almost instantly. As of last week, the company is valued at $48.4 billion which is the highest rate that it has ever been at.

This deal would have been one of the largest mergers that has ever occurred. It would have also been greater than the company’s purchase in 2008 of Skype. The purchase of Skype cost the Microsoft Corporation $8.5 billion. Microsoft had attempted to purchase Yahoo in 2008 but failed. Microsoft would have had to put up $45 billion to obtain Google, but the deal fell through CNET stated.

Salesforce utilizes a software called CRM which assists companies in tracking and organizing sales leads and calls. The company also has online services available and the fact that software is not installed on computers directly makes Salesforce look appealing to other companies such as Microsoft, Amazon, Oracle, IBM, SAP, and many others. These companies have made the transition into cloud computing but came in a bit later on so companies like Salesforce could help them to get further in the game. The success of Salesforce and the product it offers has companies such as these desiring its assistance according to The Next Digit. These bigger companies want to get further in on the action and see companies such as Salesforce as their potential path to doing just that.

Microsoft Corporation had great expectations for this deal according to Reuters but the risk was just too great. Even with $95 billion in cash to spend, the company felt that the price of the Salesforce deal was just too high. Microsoft and Salesforce called off the deal because they could not agree on a price. Microsoft is a highly successful company with huge revenue that wishes to expand even further and grow in terms of cloud computing, but the sheer price involved was just too large in this case according to CNET.

By Heather Granruth

Sources:

CNET: Microsoft Tried to Buy Salesforce for $55 Billion, Report Says

Reuters: Microsoft, Salesforce Talks Fell Through on Pricing: CNBC

The Next Digit: Microsoft Corporation and Salesforce Talks Come to an End After Negotiations Fail

CDA News: Microsoft Corporation’s $55 Billion Bid Falls Short To Secure Purchase of Salesforce

CNBC: ‘Doubtful’ Microsoft Will Buy Salesforce: Analysts

Photo By James Marvin Phelps’ Flickr Page- Creative Commons License

 

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