Salesforce acquires Slack for US$27.7 billion in record year for remote working

Salesforce acquires Slack for US$27.7 billion in record year for remote working
Source: Dado Ruvic, Reuters
Officially founded in 2013, Slack boasts around 12 million daily active users, with the work communication and services platform having seen a boost this year.

San Francisco-based cloud software company, Inc., announced this month that it would be acquiring the work communication provider Slack Technologies in a deal worth US$27.7 billion. Rumors of the acquisition first surfaced in November.

Officially founded in 2013, Slack boasts around 12 million daily active users, with the work communication and services platform having seen a boost this year.

Rumors of Slack’s sale boosted share prices by about 25%, with the valuation of the company sitting around the US$20.8 billion mark before the sale. Salesforce’s price of nearly US$28 billion thus comes as a surprise.

But the news of Slack’s sale is but one part of what has been a good year for remote working in general. Initial Public Offerings (IPOs) for tech companies that provide services especially suited for remote working – including Slack’s competitors – have seen positive returns all year.

Slack acquisition

Slack’s acquisition by cloud software company Salesforce had been rumored at least a week in advance.

The rumors boosted Slack’s shares by around 25%, sending individual share prices to just under US$40. Shares had previously hit a low point of US$15 in 2019.

Despite a general shift to remote working during the time of coronavirus, Slack was in a position to be acquired by a bigger company in 2020.

The workplace messaging app has faced significant pressure from industry competitor Microsoft Corporation’s “Teams,” which has boasted a remote-working-era boom of 115 million daily active users.

In July, Slack filed an antitrust lawsuit against Microsoft in the European Union, alleging that the tech giant had unfairly promoted its Teams product by bundling it with its cloud-based productivity services.

“Microsoft has illegally tied its Teams product into its market-dominant Office productivity suite, force installing it for millions, blocking its removal” and cutting into Slack’s market share, the company argued in a statement.

Slack’s chief executive officer Stewart Butterfield also claimed in an interview with The Verge in May that Microsoft is “perhaps unhealthily preoccupied with killing us,” but that Teams was not a true competitor to the services offered by Slack.

Rise in remote workers lifts Slack

Despite this pressure, the shift to work from home regimes as a result of the ongoing coronavirus pandemic has at least meant positive news for Slack in 2020.

In September, the company said it had made some US$215.9 million in sales in the second quarter, up 49% on a year-on-year basis. And for the third quarter of 2020, the company again reported overall revenue of some US$234.50 million, beating its own projections and the US$168.73 million it had earned in the third quarter of 2019.

Slack is not the only tech company positioned to achieve growth and success. As reported above, Microsoft Teams reported a massive increase in its daily active user count as a result of the pandemic, reaching a total of 115 million.

Asana, a web and mobile application that allows workers to track and organize assignments, also moved forward with plans to go public this year, eventually achieving a valuation of some US$4 billion. Asana’s services had also been in demand as a result of the pandemic.

With the increased stock of such apps in the wake of the coronavirus pandemic, it is perhaps unsurprising that cloud software provider Salesforce agreed to purchase Slack for US$27.7 billion.

Salesforce co-founder and CEO Marc Benioff welcomed the purchase, describing it as “a match made in heaven” and adding that “together, Salesforce and Slack will shape the future of enterprise software and transform the way everyone works in the all-digital, work-from-anywhere world.”

The acquisition of Slack by Salesforce also has much to do with challenging Microsoft, one of the company’s biggest competitors.

According to Dan Ives, analyst at Wedbush Securities, for Salesforce “this is all about Microsoft.” Ives added that “it’s just clear Microsoft is moving further and further away from Salesforce when it comes to the cloud wars.”

Slack joins a list of other companies in a variety of industries that have been acquired by Salesforce over the years, all in an effort to challenge Microsoft’s growing cloud presence and offer a variety of tools to businesses all contained under one roof.

In 2019, Salesforce acquired data visualization software company Tableau Technologies in a US$15.7 billion deal, the biggest Salesforce acquisition before the present Slack deal.

The deal is not just beneficial for Salesforce, but for Slack itself, given the difficulties the latter faces in matching the growing user base of Microsoft’s Teams service.

According to Forrester Research analyst Kate Leggett, a sale to Salesforce is “a stellar exit strategy for Slack” as “Microsoft Teams is eating Slack’s lunch.”

As COVID-19 cases continue to surge in the United States and with a widespread vaccine potentially months away, it appears that the number of workers using services like Slack and Team will only continue to rise.

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