Silicon Valley Watcher - reporting on the business of technology and media

I'm convinced Marc Benioff, CEO of Salesforce.com will succeed Larry Ellison, 63 years old, as CEO of Oracle.

I've laid out my reasoning here on ZDNet: Tom Foremski: IMHO.

Oracle has a 100bn market valuation versus Salesforce at $7bn. Oracle profit margin is 24 per cent Salesforce is 2 per cent. Oracle revenue is $20bn, Salesforce revenue is $749m.

Salesforce could become the next Oracle but it would take a decade or more of tough competitive battles. Salesforce could become Oracle sooner than that if it were acquired. Why wouldn’t Marc Benioff want to be king of the hill rather than stuck in an online software company that is in direct line of fire from several competitors and several key internet trends?

Oracle has a lock on massive markets that won’t change much anytime soon. Salesforce is in the on-demand software market which means customers can cut and switch services much more easily than payments to Oracle.

Also, Mr Benioff has recently been saying nice things about Oracle.

Benioff takes stock of software shifts - by Charles Cooper and Dan Farber.

When I left Oracle nine years ago, Oracle's revenue was $10 billion a year. Today it's $20 billion a year. Where Oracle has innovated is in the business model. You've seen substantial growth and a substantial return to Oracle shareholders through that change. With SAP, you really have not seen innovation in the last 10 years. If you think about what is the one thing that SAP has ever innovated, what have they created that's unique to the industry or value-added technology? I have a hard time thinking about what SAP is going to be known for at the end of the day.

If I was a Salesforce shareholder I'd want a piece of the rock. If I was an Oracle shareholder I'd want someone like Mr Benioff in charge.

(BTW I don't own CRM or ORCL.)

Great interview with Marc Benioff, CEO of Salesforce.com over at News.com by Charles Cooper and Dan Farber: Benioff takes stock of software shifts

Here is an interesting snippet:

What are your thoughts on a slowdown or recession and what it means for the tech business?

Benioff: We haven't really had any technology companies report numbers or make statements that this was affecting them. Maybe we will see it at some point, but I don't know. You get where you read about it and you see it on CNN and, of course, the stock market has a 200-point bear selloff. I think that's why it's on everybody's mind. But so far, tech companies haven't reported that it's an issue.

Looks like a lot of fudge to me. Mr Benioff used to tell me that he could spot upturns and downturns in individual industry sectors and in the economy as a whole. That's because salespeople are the first to be let go and the first to be hired during any economic swing. He sees those numbers every day.

Just a few days after I reported that Salesforce had approached Oracle to gauge interest in a buyout at $75 per share, Marc Benioff, CEO of Salesforce visited Cisco Systems.

A senior source close to Cisco, said that Mr Benioff was summoned as a direct result of my post. One of his meetings was with executives of Webex, a software as a service (SAAS) company acquired by Cisco last year for $3.2bn in cash.

Foremski's Take: What does this mean? It could mean that Cisco had exploratory talks with Mr Benioff about Saleforce.com being for sale.

Cisco's acquisitions such as Webex, have pushed it towards the SAAS market as it seeks new growth areas related to its network business. An acquisition of Salesforce.com [CRM] would vault Cisco into the middle of the SAAS market as a major player.

Other companies that would likely be interested in Salesforce are IBM, Microsoft, Hewlett-Packard, and SAP.

Google might also interested in Salesforce because its footprint in the enterprise IT sector is very small. A Salesforce acquisition would provide it with a well recognized brand in IT markets. And Google's computing platform could be used to scale Salesforce's applications and improve perceptions of reliability. Scaling has been an issue for potential customers of Salesforce. Google has shown its computing platform can scale rapidly by tens of millions of users.

Cisco doesn't understand the enterprise software market, at least yet. It would be difficult for it to leverage Salesforce. Microsoft is distracted by its takeover of Yahoo. SAP is too slow moving and has yet to demonstrate a viable SAAS strategy.

HP really gets SAAS. It's top strategist Shane Robison recently described a strategy in which HP sees every aspect of its future business through services:

Silicon Valley Watcher: Essential Viewing: Chief Strategist Shane Robison - The Where and Why of HP

http://www.youtube.com/watch?v=k2bFUkocthY

IBM has been determined to stay out of the IT applications business since the late 1990s and has avoided acquiring any IT apps companies. But Salesforce could be seen as a type of "middleware" play with its application platform strategy.

I think Salesforce is more compatible with the Oracle culture. And that Mr Benioff's ambitions would be far better fulfilled as an eventual replacement for Larry Ellison, the 63 year old CEO of Oracle, who is nearing retirement.

Please see: Is Salesforce Worth $75/Share To Oracle?

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.

Please also see: The Influence Of The Blogosphere Boosts Salesforce By Over Half-A-Billion Dollars