$ 27 Billion Slack Move from Salesforce and Its Effects

$ 27 Billion Slack Move from Salesforce and Its Effects Here are the details of $ 27 Billion Slack move from Salesforce and its effects. Shares of Salesforce.com spent the Wednesday low trading, with some modest disappointments from investors, with concerns over the price the company agreed to pay for collaborative software company Slack Technologies, the company's financial performance, and the announcement of the retirement of long-time CFO Mark Hawkins. Salesforce CEO Marc Benioff's enthusiasm to expand the cloud-based service package to include Slack worries analysts. Because for a business that is in fierce competition with Microsoft Teams and can lose money, there is a concern that a considerable margin has been paid.   Review Review: Salesforce announced on Tuesday that it has agreed to pay $ 27.7 billion for Slack in its stock and cash deal. Each Slack (WORK) share would replace $ 26.79 cash plus 0.0776 Salesforce (CRM) share, with the $ 45.54 value of Salesforce share falling to $ 44 with the current price drop. Salesforce reported better-than-expected results for the fiscal third quarter ending October 31st. The company generated $ 5.42 billion in revenue, up 20 percent from this time of the previous year, and non-GAAP earnings were $ 1.74 per share. Also ahead of the Wall Street consensus is $ 5.25 billion and 75 cents per share. The results for the last quarter include a gain of 86 cents per share to reflect the gains in the company's strategic investments. However, Wall Street appears to be overreacting to other items in the announcement. Salesforce saw revenue of $ 5.68 to $ 5.715 billion, above the Wall Street consensus forecast of $ 5.65 billion for the first quarter of the fiscal year ending in January. The company is currently projecting revenue between $ 21.10 billion and $ 21.11 billion in the January 2021 fiscal year, Wall Street's estimate of $ 20.8 billion. Salesforce forecasts revenue of $ 25.45 billion to $ 25.55 billion for the January 2022 fiscal year, an increase of about 21 percent, including about $ 600 million related to the Slack acquisition.

Citigroup analyst Walter Pritchard, Citigroup analyst Walter Pritchard lowered his rating on Salesforce shares from Buy to Neutral on Wednesday, lowering his price target from $ 300 to $ 250. He also clearly stated in a research note that "We are not fans of the Slack deal. We don't think Salesforce needs to buy this asset, especially in this area where Microsoft (MSFT) Teams is ubiquitous, high levels of customer conflict are inevitable. Multiple payments make it difficult to see a positive return, and the M&A (Merger) history in Salesforce. We can speak with optimism for stocks in the short term, while possibly surfacing challenging organic growth questions. ''

Pritchard said the deal looks well presented but the price is higher than he expected. “We previously had a mixed view that Slack has seen massive adoption among high-tech customers.” This is evident with a 94 percent overlap announced between Slack and Salesforce customers. The main challenge we see is Slack's selling to general customers, where Microsoft Teams have a strong presence thanks to their existing Microsoft relationships. “Pritchard thinks Salesforce's $ 27.7 billion purchase will make it harder to earn a positive return.   Macquarie Research analyst Frederick Havenmeyer, “Salesforce shares maintain their high performance rating,” Macquarie Research analyst Frederick Havenmeyer said. However, he also expresses his concerns about the deal. "In the vision presented by Salesforce, it is planned that a new" operating system "will be installed for business with Slack, and that Slack will act as an integrated front-end interface for all Salesforce clouds and third-party applications." We question in the `` buyer vs. partner discussion '' whether this agreement is decelerating in this valuation and the ~ 7% diluent (dilution effect) asset is the correct result in this valuation, although it is consistently ambitious with the merger. Salesforce CEO Marc Benioff   Needham analyst Scott Berg, Needham analyst Scott Berg repeats the Keep for Salesforce recommendation. But in a closely monitored measure of the future results of cRPO (current remaining performance obligations) he says last quarter growth was weaker than expected. He also points out that the Slack deal marks Salesforce's transition from acquisition to a more growth approach. He thinks bigger and more expensive deals may come. "This strategy reflects the strategies used by Oracle and SAP, both of which lack the driving force for sustained and long-term sales synergies," Berg said. In addition, large acquisitions pose challenges related to operating margin and dilution of free cash flow margin. Considering how underperforming Oracle and SAP stocks have been in the last few years, we believe this new strategy will also lead to lower performance for Salesforce."

UBS Group analyst Karl Keirstead, UBS Group analyst Karl Keirstead maintains the Buy rating but lowers the target price from $ 325 to $ 300. He's not a happy guest in general. "After robust checks on post-Covid software demand, we maintain our Buy stance on Salesforce. But we believe the situation has blurred, with some cRPO (remaining performance obligations) missed in the near term. A rich looking SLACK purchase price of $ 28 billion and an unconvincing synergy story. In addition, as a result of the CFO's departure, the long-term organic growth target of 20 percent needs to be reduced by a few percentage points ”.   Brent Bracelin, Piper Sandler analyst, Piper Sandler analyst Brent Bracelin maintains the Overweight rating on Salesforce shares, adding that the Slack deal has "game-changer potential" but comes with a "price tag shock." Bracelin says that Slack is still in the early stages of expanding corporate sales teams and states, "should take advantage of Salesforce's broader sales distribution and existing corporate relationships."   However, he stated that some investors were pushing the valuation back. The purchase price is more than 24 times the expected 2021 calendar sales and requires the issuance of approximately more than 50 million shares. - For a company that has just reached a $ 1 billion working rate. In Wednesday's trading, Salesforce shares fell 7 percent to $ 224.49, while Slack fell 1.5 percent to $ 43.17.     Source: https://www.barrons.com/   You may also be interested in: Ripple CTO: If Majority Wants a Change, There is Nothing Minority Can Do