Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

Is Salesforce Worth $75/Share To Oracle?

Posted by Tom Foremski - February 9, 2008

I'm hearing from a reliable source that Salesforce.com has approached Oracle to gauge if there is any interest in a sale at $75 a share. That would be almost a 50 per cent premium over Friday's close of $50.87.

The deal would make sense:

-It would provide Oracle with a strong brand in online apps and a strong transition road map to cloud computing and a software as a service business model.

-Salesforce would benefit from Oracle's dominant position in enterprise IT markets, which would help in convincing corporations that Salesforce is a scalable and viable enterprise solution.

-Marc Benioff, CEO of Salesforce would make a good successor to replace 63 year old Larry Ellison, CEO of Oracle, when he retires says Matthew Greeley, CEO of BrightIdea.com. Mr Benioff is used to work at Oracle. When he left Oracle in 1999, Mr Ellison provided seed funding for Salesforce and also served on its board of directors.

-Mr Benioff needs a new challenge, he appears to be losing interest in Salesforce, or at least reducing his financial interest in his company at a rapid daily rate. He has been selling 10,000 Salesforce shares every single day since 21 August 2007. Before then, he sold 20,000 shares every day since 14 November 2006. Prior to that date, Mr Benioff sold thousands of shares every day in variable amounts since 31 July 2006.

[Please see: Insider Trades - Marc Benioff - Yahoo! Finance.]

-An Oracle acquisition of Salesforce would strengthen its strategic position against SAP, the top enterprise application software company. SAP has been slow in figuring out its online strategy, even naming its initiative has been challenging to the company.

UPDATED: Larry Ellison will have to buy Salesforce at some point anyway. Netsuite cannot be scaled to the size of Salesforce in this decade, maybe in the next. The two businesses could be easily integrated, that's the beauty of online software, it's all standards based.

Buying CRM now at a 50 per cent premium would be a good deal for ORCL. MSFT is going to have to cough up much more than the 62 per cent premium it initially offered for YHOO...

And Salesforce is to Oracle, as Yahoo is to Microsoft, in terms of future direction and strategic positioning.

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