Today: Microsoft has dropped out of the bidding for Salesforce after CEO Marc Benioff asked for as much as $70 billion, according to a CNBC report. Also: HP gets a boost from earnings.
The Lead: Salesforce reportedly wanted $70 billion from Microsoft
If Salesforce does get acquired, it won’t be cheap.
CNBC reported Friday that Microsoft and Salesforce negotiated on a merger that would have been the priciest in Silicon Valley history, and easily surpasses the total Microsoft offered in its famous back-and-forth with Yahoo in 2008. According to anonymous sources cited by CNBC’s David Faber, Microsoft was willing to spend $55 billion on the cloud software pioneer, but Salesforce CEO Marc Benioff wanted as much as $70 billion.
Salesforce — founded by Benioff in 1999 — was one of the first companies to find success in offering software as a service, so-called cloud delivery that maintains programs on remote servers. Booming revenues have made the San Francisco firm one of the 20 largest tech companies in Silicon Valley, with sales breaching $5 billion last year.
Salesforce’s market valuation topped $50 billion for the first time late last month, after reports that the cloud-software pioneer had hired advisers to assist with a bid to buy the company. Bloomberg News, which originally broke the story, reported in early May that Microsoft was considering a bid but had not spoken with Salesforce; CNBC countered Friday that the two companies were actually in talks at that time, and that they were serious.
“A number of people close to the talks believed they had the momentum to have reached a deal, until price became a defining roadblock,” Faber reported.
FBR Capital Markets analyst Daniel Ives said both sides appeared to be right: At Microsoft’s offer level, it would be a good deal for the Washington tech giant, while Salesforce might still be able to find a willing buyer at $60 billion or even $70 billion.
“At $55 billion that would be a digestible acquisition and one that would make sense for Microsoft given (Microsoft CEO Satya) Nadella’s strategic cloud vision,” Ives wrote in an email Friday. “Salesforce is the golden jewel in the cloud given its leadership position and stellar brand and distribution.”
Microsoft-Salesforce talks appear unlikely to kick back into gear, CNBC reported, which leaves outsiders to ponder if anyone will pay as much as Benioff seems to want for his company. Ives said that Oracle and Amazon might be the companies able and willing to go that high besides Microsoft, and Ironfire Capital founder Eric Jackson wrote Friday not to count Microsoft out from future bids.
“Microsoft could see this as a means to much more effectively compete in the enterprise arena against Oracle and SAP,” Jackson wrote for TheStreet.
Salesforce, which got a boost this week from revealing rare quarterly profits, jumped again after Friday’s report, closing with a 2.9 percent gain at $75.01. At that price, Salesforce’s market value is about $49 billion, more than 10 percent higher than a month ago, before reports of a potential sale began.
SV150 market report: Hewlett-Packard gains after earnings
Wall Street indexes mostly dipped Friday ahead of the long Memorial Day weekend, but Silicon Valley tech stocks advanced amid post-earnings gains for Hewlett-Packard and Intuit.
HP added more than 2 percent for the second consecutive day, with Thursday’s gains fueled by a deal to advance its business in China and Friday’s increase arriving after an earnings report that showed profits surpassed expectations but revenues continued to lag. Analysts said that CEO Meg Whitman calmed fears about the costs of HP’s impending corporate split, and shares gained 2.8 percent to $34.76. Intuit neared that performance, adding 2.5 percent to $106.76 after posting a strong tax season despite some challenges.
Apple gained 0.9 percent to $132.54 amid reports that it is having trouble securing the channels it wants for a streaming-television service and that Apple Watch orders have slipped. Google fell 0.4 percent to $540.11 while reporting that it may take awhile to satisfy demand for its Project Fi wireless service, and eBay dropped 2 cents to $59.72 amid plans to expand a pickup service in Europe.
Up: FireEye, LendingClub, Salesforce, HP, Intuit, GoPro, Palo Alto Networks
Down: Zynga, Pandora, Symantec, Oracle, Adobe, Cisco
The SV150 index of Silicon Valley’s largest tech companies: Up 5.75, or 0.32 percent, to 1,808.43
The tech-heavy Nasdaq composite index: Down 1.43, or 0.03 percent, to 5,089.36
The blue chip Dow Jones industrial average: Down 53.72, or 0.29 percent, to 18,232.02
And the widely watched Standard & Poor’s 500 index: Down 4.76, or 0.22 percent, to 2,126.06
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