Why Was Microsoft Corporation (NASDAQ:MSFT) Interested in Acquiring salesforce.com, inc. (CRM)

Microsoft Campus
A building on the Microsoft Headquarters campus is pictured July 17, 2014 in Redmond, Washington. (Stephen Brashear/Getty Images)

In the past few weeks, there’s been a lot of speculation over salesforce.com, inc. (NYSE:CRM) being acquired by one of the big software companies such as Google Inc (NASDAQ:GOOG), Hewlett-Packard Company (NYSE:HPQ), SAP SE (ADR) (NYSE:SAP), Oracle Corporation (NYSE:ORCL) and Microsoft Corporation (NASDAQ:MSFT).

Reportedly Microsoft made an offer for $55 billion but Salesforce founder and chief executive, Marc Benioff, wanted $70 billion which caused the discussions to break down. Salesforce is believed to have hired a couple of investment bankers for managing takeover offers. Salesforce, which is a frontrunner in customer relationship management software and cloud computing is supposed to be a good catch for Microsoft, which seeks expansion in those businesses. Apart from price issues, Microsoft chief executive, Satya Nadella, was a trifle reluctant to sign a deal of such magnitude.

Salesforce is the leader of the global customer relationship management market which was worth $23 billion in 2013. Salesforce provides its service via the cloud. Hence, no software has to be directly installed on desktops. Salesforce has recently partnered, with UK-based Sage an accounting and payroll software vendor. This is part of the firm’s endeavor to expand its cloud computing tools to SMEs.

Microsoft already owns a CRM – Microsoft Dynamics. Then why is it so interested in acquiring a similar product. The interest in Salesforce was not because of financial benefits or product alignment. The reason was boosting current market share and long term gain.

Salesforce has a proven model, huge revenue and profits beyond market expectations. Additionally, Salesforce is the undisputable leader in the cloud CRM space. In short, Salesforce has strong growth opportunities ahead. What makes Salesforce so attractive to Microsoft are customers in all market sizes. It’s leading in all three market types- big enterprises, mid-size companies, and small businesses. The cloud portion of the CRM is significant and expected to expand and dominate in the future.

Microsoft’s acquisition of Salesforce would have made it the leading player in the enterprise cloud market.

Sources: businessinsider.in, forbes.com