Cloud-based software company Salesforce.com negotiating for acquiring workplace messaging app Slack as it plans to extend its offerings to businesses, people concerned with the developments said on Wednesday.
Salesforce’s bid comes at a time when Slack is trying hard to entirely capitalize on the switch to remote working during the COVID-19 pandemic in the face of tough rivalry from Microsoft’s Teams and other workplace apps.
Slack shares closed trading on Tuesday at $29.57, much below the $42 high they reached on their first day of trading during the previous year.
For Salesforce, the probable acquisition is a logical extension of its enterprise offerings, the sources confirmed. The amount it is offering for Slack was not revealed, though according to one of the sources, Salesforce would pay cash for the deal, instead of using its stock as currency.
If the talks conclude amicably, an agreement may be declared before Slack reports quarterly earnings on December 9, one of the sources informed.
Neither Slack nor Salesforce reacted to any requests for comment.
Slack shares jumped 24% to $36.58, enabling the company a market capitalization of $21 billion, while Salesforce fell 2.7% after the Wall Street Journal first reported that the two organizations had participated in deal talks.
Slack has gained from companies depending more on information technology systems to stay connected with their workers during the pandemic.
Its app has been installed approximately 12.6 million times till now this year, up by almost 50% from the same period in 2019, according to analytics firm Sensor Tower.
But the economic fallout due to the pandemic has compelled Slack to offer discounts and payment concessions to many of its customers who have had to resort to cost-cutting.
In an endeavour to save money, some organizations have also been switching to Teams, which is accompanied by many of Microsoft’s office software packages.
Rishi Jaluria, an analyst at research firm DA Davidson and Co thinks Microsoft Teams has been successful in capitalizing on the opportunity better than Slack, partly due to they giving it away for free as a bundle. Now Slack understands that they may be able to avail better penetration as part of a larger company.
Slack’s billing growth, a crucial indicator of future revenue, slowed in the three months leading up to the end of July.
Salesforce on the other hand has been growing financially during the pandemic. It increased its annual revenue forecast in August as the pandemic stimulated demand for its online business software that is compatible with remote work and commerce.
Salesforce has been growing its cloud business through acquisitions and had invested above $16 billion last year to negate competition from rivals such as Oracle and German competitor SAP.