Last week, the leading on-demand customer relationship management (CRM) and cloud computing company Salesforce.com Inc. (CRM) completed the acquisition of web-based video conferencing firm, Dimdim. The acquisition will cost Salesforce $31.0 million in cash.
Founded in 2007, Dimdim provides a cloud-based real-time communications platform. Salesforce believes that Dimdim’s technology will better complement its existing collaborative cloud offering, known as Chatter (introduced in June 2010).
Chatter is a collaboration application for enterprises, enabling them to connect and share information securely. Chatter facilitates in connecting an organization’s employees to customers and prospective customers. The Dimdim capability will add real-time communication to the Chatter platform, aiding direct interaction through the platform itself.
Salesforce has stated that Chatter deployment rates are already witnessing an upward trend due to increasing demand for effective after-sales service. Therefore, the additional features of real-time chat, voice calling and image sharing may be expected to speed up adoption of the Chatter platform and increase customer loyalty.
The Dimdim acquisition will expand the customer base, geographical exposure and market share of Salesforce. However, Salesforce will witness a dilution of approximately 1 cent in its 4Q11 GAAP earnings and roughly 4–5 cents in its FY12 earnings.
Salesforce.com reported decent third quarter fiscal 2011 results. It also provided an encouraging guidance for the fourth quarter and raised the full-year fiscal 2011 expectations on improving fundamentals.
We, however, caution investors about strong competition in the CRM application and cloud computing areas. Google Inc. (GOOG) and Microsoft Corp. (MSFT) are worthy of special mention, since they have been fighting to win government clients at local, state and federal levels to use their online e-mail and other applications that fit into the cloud-computing space.
Currently, Salesforce.com has a short-term Hold recommendation, as is indicated by the Zacks #3 Rank.
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