Salesforce Buying Big Data Visualizer Tableau For More Than $15B

Cloud-based CRM giant Salesforce moved into big data in a big way yesterday with a more than $15 billion definitive agreement to acquire its “good friends @tableau,” as co-founder and CEO Marc Benioff put it in a tweet  announcing the all-stock deal. 

“Tableau helps people see and understand data, and Salesforce helps people engage and understand customers,” Benioff elaborates



Or, as  Benjamin Romano puts it in the Seattle Times, “Tableau’s software helps people make modern graphs and charts from enormous data sets without the need of a computer science Ph.D. Salesforce found early success with the software-as-a-service model, in which companies subscribe to its web-based customer relationship management tools, rather than buying a license and running software on local servers.”

Tableau is based in Seattle; Salesforce in San Francisco. Tableau shareholders will get 1.103 shares of Salesforce common stock for each share they own. 

“The price tag is about 13 times Tableau’s revenue, ranking it among the most expensive software deals recently, according to data compiled by Bloomberg. The only other deals that were more costly on that basis were Cisco Systems Inc.’s acquisition of AppDynamics in 2017, SAP SE’s purchase of Qualtrics last fall, and Salesforce’s own takeover of MuleSoft a year ago -- a process also driven by Benioff,” writes Bloomberg’s Nico Grant.

So, why do the deal (outside of the fact that Benioff is a serial acquirer, having bought more than 30 companies over the past five years)?

The company “has the ambition to become a more sprawling software superpower and is willing to pay a steep price to get there,” Bloomberg’s Shira Ovide writes  for the Washington Post.

“The company reportedly worked hard to -- but ultimately missed out on -- buying LinkedIn (which Microsoft  picked up instead), and while there isn’t a whole lot in common between LinkedIn and Tableau, this deal will also help Salesforce extend its engagement (and data intelligence) for the customers that Salesforce already has -- something that LinkedIn would have also helped it to do,” writes Ingrid Lunden for TechCrunch.

“This also looks like a move designed to help bulk up against Google’s move to buy Looker, announced last week…,” Lunden continues.

The Looker and Tableau acquisitions both “appear to be expensive moves to shore up … competitive stances against an older but wiser software behemoth, Microsoft Corp.,” MarketWatch’s Therese Poletti  posits. “The deals seek to put both Google’s cloud business and Salesforce in better positions with more business-analytics software for their cloud-based customers, where data is the biggest buzzword but where the two companies had not been meeting their potential.”

And let’s not forget that other Seattle-based company with a presence in the cloud.

“At the moment, Amazon and Microsoft are generally seen as the two leaders in the market, with the success of their Amazon Web Services and Azure products, respectively. AWS brought in more than $25 billion in revenue in 2018. Alphabet does not break out cloud revenue,” Jordan Valinsky writes  for CNN Business.

“Zane Chrane of Bernstein noted on Monday that Salesforce has a strong record of driving revenue growth in its acquired companies, but most of the companies it bought employed the same subscription-based business model that Salesforce uses.… Chrane called Salesforce’s latest deal an ‘offensive acquisition and a risk-taking move,’” Dan Gallagher writes for the Wall Street Journal.

“Tableau is not a cloud company. Its products run primarily in on-premises data centers, with over one-third of deployments in the cloud, CEO Adam Selipsky said on the call with analysts after the deal was announced,” CNBC’s Jordan Novet and Ari Levy report. “Similarly, in March 2018, Salesforce spent $6.5 billion on MuleSoft, whose software connects data that’s stored in all sorts of places, regardless of whether it’s running in the company’s data centers or if it’s hosted elsewhere.

“It all speaks to Benioff’s big challenge. Now that Salesforce is generating over $13 billion a year in revenue, with expectations to top $16 billion in fiscal 2020 and reach up to $28 billion three years later, the company has to seek growth beyond pure cloud plays,” Novet and Levy add.

The market’s initial reaction to the deal was skeptical. Salesforce’s stock “plummeted as much as 8% during the session before paring losses and closing down 5.26%,” reports  CNBC’s Tyler Clifford. 

But that’s nothing out of the ordinary. 

“Salesforce has always been inseparable from Benioff’s vision, his whims and his mission. Shareholders have been richly rewarded as Salesforce has cemented itself as a fast-growing company fueled by acquisitions and driven by its status as an indispensable technology for sales departments. Expensive, strategically head-scratching dealmaking is the price of Salesforce’s ambitions,”  Ovide observes.

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