Hey Global Investor, here’s what you need to know before the US markets open.
Market Snapshot 📈
S&P 500 (Tuesday Close) 3,662.45 +40.82 (1.13%)
NASDAQ (Monday Close) 12,355.11 +156.37 (1.28%)
FTSE 100 (5 PM IST) 6397.36 +12.63 (0.19%)
NIFTY 50 (Today’s Close) 13,113.75 +4.70 (0.036%)
USDINR (5 PM IST) 73.79 (1 Year +2.61%)
A $27.7B “Teams” Up Against Microsoft?
The definition of “workplace” is undergoing a transformation in the post-pandemic era. Salesforce’s acquisition of Slack for $27.7B is an effort to become part of the narrative and puts it in direct competition against Microsoft Teams.
Background: Salesforce is one of the most valuable software companies globally, surpassing icons such as IBM, SAP, Oracle, and Intel. Salesforce’s Slack deal is its third in as many years. In 2018, the company acquired MuleSoft for $6.5B; in 2019, it purchased Tableau, the data visualization company for $15.3B.
Founded in 2009, Slack was initially an online gaming company called Tiny Speck which failed. The founder Stewart Butterfield pivoted the product to help people communicate and share files. Slack launched in early 2014, onboarded 30,000 teams by October, raised $120M from Kleiner Perkins and Google Ventures and officially became a Unicorn – all in the same year. It went public in 2019 at a valuation of $23B.
What Happened? Slack’s acquisition is the largest thus far in Salesforce’s 21-year history Slack’s shareholders will receive 0.0776 common Salesforce stock and $26.79 in cash for each share of Slack, which works out to $45.86 per share. Last week, Slack was trading at under $30 until rumors of the impending deal surfaced.
Salesforce has been smarting since 2016 when it lost the bid to acquire LinkedIn which was bought by Microsoft. As for Slack, it has been taking fire from MS Teams for some time. Slack stopped releasing its daily active users (DAU) count after topping 12M in 2019. This was seen as a sign of weakness by analysts. MS Teams on the other hand counted 115M DAUs as of last month.
In fact, earlier in the summer, Slack had filed a complaint to the EU against Microsoft, contending it was using its dominance to gain users in Teams.
Is this the most effective use of Salesforce’s resources? Could the company have partnered with Slack in some way rather than an outright acquisition? As if on cue, the company’s shares fell after the announcement. Either way, the die has been cast as each company vies for dominance and tries to capitalize on the work-from-home trends. This deal values Slack at 24 times forward revenue and is expected to conclude by July.
Market Reaction: Salesforce closed at $241.35 on Tuesday, down 1.81%. The shares dropped over 4% in after-hours trading.
Slack stock is up 95% YTD and 44% since last week. The price fluctuated between slight gains and losses after hours, following a 2.2% rise in regular session to settle at $43.84.
Company Snapshot 📈
CRM $241.35 -4.45 (-1.81%)
WORK $43.84 +0.96 (+2.24%)
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Later Today 🕒
- After Market Close: PVH Corp Earnings (PVH)
- After Market Close: Five Below Inc Earnings (FIVE)
- After Market Close: Snowflake Inc. Earnings (SNOW)
Fun Fact of The Day 🌞
To create one pint of beer it takes 20 gallons of water.