We know why salesforce.com (CRM, $225) wants to buy Slack (WORK, $43). The customer relationship management software titan just posted quarterly bookings growth of only +10% YTY, and it promises a 20% revenue CAGR. CRM needs to assault Microsoft (MSFT, $214) in the enterprise if it’s going to achieve its sales goal, and under CEO Satya Nadella, who’s among the best tech leaders, MSFT isn’t standing still. MSFT has been gaining traction with its Teams collaboration tool.
Last year, CRM tried to close Microsoft’s Power BI gap in data visualization by purchasing Tableau Software for $16 billion. I think that they overpaid for Tableau, but the target had robust technology. I’m not as confident in WORK’s position, and, while CRM has a sales and marketing machine, can it add much value to WORK’s capabilities? Although WORK loses money, it’s well funded. It doesn’t need more research and development spending. It needs better bells and whistles for its existing spending. WORK should’ve made more hay during COVID like other enterprise resource planning software companies have done, but, while its sales were +39% last quarter to $235 million, many of us had expected more from a company which should’ve been an even bigger pandemic beneficiary.
One of WORK’s problems is that it’s missing video in its collaboration product suite. Whoops! It should’ve taken a page from Zoom (ZM, $416, +511% YTD) and had joined that party. Is it too late now? CRM CEO Marc Benioff is a smart gentleman. That’s why he’s a multi-billionaire, and I’m not. However, by paying almost 30X sales for WORK, I don’t think that he and CRM can make the slack salesforce deal fly at this egregious price, particularly with tech concerns swirling around WORK and given that it’s facing big, ruthless competitors like MSFT.
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Note: I nor my family nor my firm have significant positions in CRM or WORK, long or short.
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