Salesforce in a gambling mode; if not Twitter it will soon be something else

Tom Paine

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As Salesforce (CRM) is <a href=""> evidently pondering a possible bid for Twitter</a>, one wonders where its share price has been over the past year (see chart).

Its 52 week range has been $52.60 - $84.48, though that's been up and down - not really growth, and it currently sits at $70.39 as of Friday's close. CRM's market cap has seemingly been stuck in the $50-55 billion range (until its recent drop). It was down almost 6% on word of its Twitter interest Friday. Market cap is important not only
because it reflects aggregate shareholder value, but because its the relative currency used to make acquisitions.

Factors that have influenced the stagnation of CRM shares include an ongoing correction of SaaS valuations, Salesforce customer and partner pipeline surveys by analysts showing hints of weakness in demand, and the potential dilutve effects and integration issues around Salesforce's rapid M&A expansion, which has led some to question its organic growth potential. Salesforce had beaten off the bears until its last earnings report at the end of August, when it barely met estimates and fell on weak future guidance. The revelation that Benioff aggressively pursued LinkedIn prior to the latter linking up with Microsoft, although making strategic sense at some price, further worried some investors.

With Salesforce's current market value under $50 million, buying Twitter could cost it up to half that amount or more. That's a risky strategy given an integration that would be trickier than for LinkedIn, unless someone at Salesforce thinks they've found the secret sauce in terms of leveraging Twitter data (they've been working with it).

I've had the sense from some of Benioff's comments and actions over the past year or so that he wants to do something really big to transform Salesforce and the enterprise SaaS business, that he's not happy standing pat. He's a bright guy who's been successful to this point, so I'm not going to quibble much with his judgment, but he's in a risk-taking mode and if Twitter doesn't happen something else eventually will.

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