(Bloomberg) -- Salesforce.com Inc.‘s $15.3 billion acquisition of software maker Tableau Software Inc. will move the company further away from its central business, marking a new era for the top seller of software for managing customer relationships.
The all-stock deal, which the companies announced Monday, is Salesforce’s largest transaction ever -- dwarfing its purchase last year of MuleSoft Inc. for $6.5 billion, the previous record. Tableau will bring San Francisco-based Salesforce into the business intelligence market, far deeper into analytics than it has previously ventured. Investors were skeptical, sending Salesforce shares to their worst day in almost seven months.
Co-Chief Executive Officers Marc Benioff and Keith Block promised revenue of $28 billion a year by fiscal 2023. But investors have been concerned that the pace of growth at Salesforce, long the bellwether in the cloud applications market, was slowing. The deal is another way for Benioff to keep his word on growth and product capabilities. While the executives have said Salesforce didn’t need to make major acquisitions to earn the growth, the company has continued buying businesses. Tableau will bolster sales this year and bring the company further into competition with software giants Microsoft Corp. and Oracle Corp., both of which offer business intelligence tools.
The deal means that Salesforce, whose key to success has been a dominant position in customer relations, is becoming more of a general-purpose information technology company -- following Oracle’s transformation from database giant to IT conglomerate over the last 20 years, when it snapped up new products and customers.
The acquisition will test Salesforce’s focus, said Zane Chrane, an analyst at Sanford C. Bernstein & Co.
Business intelligence “is not Salesforce’s core competency and there is much Tableau does that doesn’t pertain to the CRM world, making the fit slightly imperfect,” Chrane wrote Monday in a note. The acquisition is also an “implicit admission” that Salesforce’s analytics product, Wave, “was a flop.”
Tableau will also move Salesforce more deeply into corporate data centers. Some of the analytics company’s software sits on clients’ computer servers, and it has sought to generate more sales from cloud-based software accessed through the internet. While MuleSoft’s integration tools can help customers connect Tableau to other systems, Salesforce’s heritage is in the cloud.
Buying Tableau will be “transformative” for Salesforce, Wedbush Securities analyst Steve Koenig said Monday. Salesforce will open a second headquarters in Tableau’s hometown of Seattle, and will let the unit operate independently there under current CEO Adam Selipsky -- a relatively unusual decision for Salesforce, whose center of power has always been in San Francisco.
Benioff’s recent obsession has been Salesforce’s Customer 360 initiative -- a promise that the software maker will be able to use all the consumer data gleaned by its products for the benefit of corporate clients.
“We’ve pivoted our entire company into something that we call Customer 360,” Benioff said on Salesforce’s earnings conference call last week. On Monday, he tweeted that Tableau accelerates the “Customer 360 dream,” acknowledging that Salesforce didn’t have all of the capabilities to pull it off -- even with MuleSoft’s data integration tools.
Together @tableau & @salesforce Einstein creates the most intelligent, intuitive analytics & visualization platform for every department, every use case, every user at every company! Accelerating the Customer 360 dream! sfdc.co/cboQH Important: sfdc.co/baBiWi
Sent via Twitter for iPhone.
View original tweet.
Benioff is the executive who leads Salesforce’s largest acquisitions, particularly ones that include a pivot to new markets. His emotional buying style often means paying large markups to purchase companies that bolster Salesforce. The company will pay 42% more for Tableau than the target’s market capitalization at the close of trading on Friday.
Read more about unique approach to acquisitions
Salesforce shares declined 5.3% to $152.79 at the close in New York, the biggest single-day decline since Nov. 19. Tableau’s stock jumped 34% to $167.41.
When comparing price to revenue, Tableau is among the most expensive recent software deals, according to data compiled by Bloomberg. The transaction’s multiple is bested by Cisco Systems Inc.’s acquisition of AppDynamics, SAP SE’s purchase of Qualtrics, and Salesforce’s own takeover of MuleSoft Inc. a year ago -- a process also driven by Benioff. Salesforce will pay about 13 times the value of Tableau’s revenue for fiscal 2018.
Benioff said he’s long felt a kinship with Tableau, which he described as “a brother from another mother.”
“We’ve tried to do something for a long time and it’s just hard to get the stars to align,” he said on a conference call. “And I think that we are fortunate that we got there. Our customers are looking to do a lot more in this area.”
While Tableau will be a strategic asset for Salesforce in analytics, the acquisition provides a much-needed exit amid strong competition.
“Microsoft was eating their lunch and the standalone analytics market is going away,” Rebecca Wettemann, an analyst at Nucleus Research, said in an interview. “Everybody is going toward embedded analytics, so it’s good for them they got a home.”
For Salesforce, the deal helps Benioff keep promises to customers and investors.
“We’ve always seen Marc have ambitious plans and then take inorganic actions to fulfill them,” Wettemann said.