Slack’s stock is up 38% on potential acquisition by Salesforce

Disclaimer

WHAT IS SLACK?

Slack is an enterprise collaboration and communication platform that allows users to interact through chat rooms, private groups, and direct messaging.

Slack delivers technology that replaces email as the primary enterprise communication. The collaboration platform transforms emails into messages and replaces inbox with channels.

The channels are grouped into different subjects, such as marketing and accounting, to create simultaneous conversations among the team member registered in the channel.

The users can post updates, upload documents, ask questions in the channels, and immediately get responses from the other team members. The collaboration process breaks the communication barrier, increase interactions, and reduce information bottleneck.

The platform allows the company to focus on team collaboration and improve communication flow. It allows the enterprises to keep everyone on the same page all the time, thus improve team cohesiveness and minimize communication breakdown.

The organizational effectiveness will be improved as the platform will lower the risk of error caused by miscommunication. This improvement will reduce costs and make the organization more agile in a competitive and disruptive world.

SALESFORCE ACQUISITION

The shares of Slack are up to nearly 38% today after the news about Salesforce’s potential acquisition is available to the market.

The collaboration platform company earned more than $630 million in revenue for the 2019 fiscal period. The revenues grow nearly 83% year-over-year since 2017. Slack gains more popularity during the pandemic as more people work from home.

Slack is currently valued at $23.22 billion, and the stock is trading at $40.70 per share. The company is still reporting negative earnings per share as it is still growing and investing heavily in its technology.

In 2019, Slack spent 72% of its revenue, $457 million out of $630 million, in research and development. To date, Slack has more than 12 million active members worldwide.

Salesforce has been active in acquisition to buy growing companies. The cloud-based company acquired MuleSoft in 2018 for $6.5 billion to expand its cloud application. One year later, Salesforce bought Tableau, a data visualization software, for $15.7 billion, more than double from the previous acquisition.

The acquisition of Slack will be its biggest deal ever. It will match the mega-merger between IBM and Red Hat for $34 billion in 2019, the acquisition of LinkedIn by Microsoft for $27 billion in 2016, and Facebook’s acquisition of WhatsApp for $19 billion in 2014.

Combining collaboration platforms and cloud infrastructure will create strong synergies as more companies are going into a virtual workplace.

The synergies between Slack and Salesforce create a threat for Microsoft as the major provider for enterprise email services. Therefore, Microsoft is pivoting into a similar business model as Slack by developing Microsoft Teams.

The development of Microsoft Teams was triggered after the failed attempt by Microsoft to acquire Slack for $8 billion in 2016. The shares of Microsoft stayed flat today while Salesforce’s stock dropped more than 5%.