Salesforce.com Shares Jump On Report They've Shopped Themselves To Oracle; Seems Pricey For Larry, Though
Salesforce.com (CRM) is higher today on a report from the blog SiliconValleyWatcher.com that says the company “has approached Oracle (ORCL) to gauge if there is any interest in a sale at $75 a share.”
Context & Ripple Effects
Salesforce.com spent 2007 positioning itself as the on-demand software company that big players wanted close: in May 2007 it was in alliance discussions with Google. Today's move comes from the other direction — a SiliconValleyWatcher.com report, unconfirmed by either company, says Salesforce approached Oracle to gauge interest in a sale at $75 a share.
The stock is up on the rumor, but the commentary attached to it flags the central problem: at that price the deal looks expensive even for Oracle's Larry Ellison, whose acquisition record sets the market's expectations for what he will pay. Whether the approach is real matters less than what it reveals — that a pure-play SaaS leader sees itself in play.
First-order effects
- Salesforce.com shareholders get an immediate premium signal: even an unverified $75-a-share approach re-rates the stock against its standalone value.
- Oracle now has to answer publicly or privately whether on-demand software fits Ellison's acquisition math, with every day of silence read either way.
Second-order effects
- If Oracle declines at $75, the same report makes Salesforce legible to other suitors — most obviously Google, which was already exploring an alliance with the company last May — turning a private feel-out into an open auction dynamic.
- Rival enterprise software buyers face a repricing problem: if a $75 benchmark for the leading SaaS vendor sticks, every other on-demand asset gets more expensive to acquire.
Third-order effects
- If the pattern holds, application software consolidates around a few large acquirers folding SaaS leaders into established portfolios rather than competing with them standalone — with the price of admission set by deals like this one.
- A credible takeover floor under a pure-play SaaS name also changes how the market values the category: subscription revenue starts being priced with an acquirer's multiple in mind, not just a public investor's.
The trend: Enterprise software is entering a consolidation phase in which incumbent giants decide between buying the leading on-demand vendors or partnering with them, and every approach resets the category's valuation floor.