Customer Relationship Management software maker and Enterprise cloud computing company Salesforce.com (CRM), today announced that it has entered into a definitive agreement to acquire Radian6, the industry’s leading social media monitoring platform, for approximately $276.0 million in cash and $50.0 million in stock, net of cash acquired.
The company has set a deadline to complete the transaction by July 31, 2011, subject to certain terms and conditions. With the acquisition of this company, salesforce.com is expected to gain a leadership position in media monitoring. This presents a huge growth opportunity for the company as this segment offers lots of business potential.
The enterprise social software market is expected to grow at a 5-year CAGR of more than 50%. Social media has reached every segment of the society through brands such as Facebook (with over 500 million users), Twitter (more than 175 million users), and LinkedIn (over 100 million users).
There are numerous other growing businesses in this segment that need some efficient tools to manage the information, knowledge and networking effect of social media, which is expected to be delivered by the joint entity.
Moreover, Radian has a vast product offering, including the Radian 6 dashboard, serves as a better monitoring platform for companies looking to monitor their social media in an effective way. Radian6 Engagement Console also helps companies connect with individuals and communities online. We believe the addition of the Radian product line enriches Salesforce’s product portfolio, making it more attractive to the customer.
Salesforce is growing in size through continuous acquisitions. In January of this year, the company completed the acquisition of web-based video conferencing firm Dimdim. The acquisition has been completed for $31.0 million in cash.
The Dimdim acquisition is expected to expand the company’s customer base, geographical exposure and market share of Salesforce. However, Salesforce will witness a dilution of approximately 1 cent per share in its 4Q11 GAAP earnings and roughly 4–5 cents per share in its FY12 earnings.
Moreover, in the same period, the company completed the acquisition of cloud-based application solutions provider, Heroku. Salesforce paid $212.0 million in cash. The company also granted restricted shares worth $27.0 million and paid $10.0 million for unvested Heroku shares.
This acquisition has enabled Salesforce to advance in the Cloud 2 platform. Heroku’s Ruby-based platform-as-a-service will allow Salesforce’s customers to easily develop advanced applications.
However, acquisitions are not the only growth driver for Salesforce. The company is aggressively tapping the Small & Medium Enterprise (SME) market. The company’s customer relationship solutions are affordable to most small enterprises and will help to grow businesses for these companies.
Salesforce is also helping clients track email communications from Microsoft Outlook, Gmail, or Yahoo mail from Yahoo! Inc (YHOO) or any email system, and keeps detailed record of customer interactions to improve sales and enhance customer satisfaction. The company was one of the first to develop its lower cost on-demand services into a successful business model. The company is diversifying its business across various segments.
Other than SME’s, Salesforce is trying to tap Government organizations that are clearly benefiting from its cloud computing services. The services have helped government organizations save time by reducing the cost of additional hardware and software without incurring any additional employee cost.
Going forward, these benefits should draw the attention of other government customers around the world, generating additional demand for companies like Salsforce.com in the cloud computing segment.
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 Zacks #4 Rank, implying a short-term Sell recommendation.
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