Microsoft Salesforce Acquisition: ‘Please Do Not Do This’

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Microsoft is apparently gearing up to acquire Salesforce, but Elevation Partners co-founder Roger McNamee thinks it is a terrible strategic mistake on the part of the software giant. McNamee went on to say that had he been a Microsoft shareholder, he would have sent a note to the board suggesting, “Please do not do this.”

Microsoft interested in culture more

According to McNamee, with a market capitalization of $48.7 billion, Salesforce is already a big fish, and Microsoft should build the services offered by it indigenously rather than acquiring Salesforce to get those services. “They should be building things internally, and they have lots of opportunities to do that,” said McNamee during CNBC’s “Squawk Alley.”

McNamee believes Microsoft might be interested more in Salesforce’s company culture than its products. But since the software company is not looking for a new CEO, the acquisition may not provide many cultural benefits.

“I think in fact a large number of people would leave right away and they’d have all the products,” and though the products have some worth, they don’t justify paying $50 billion or more on the acquisition.

A difficult acquisition

Microsoft is said to be evaluating options for a Salesforce acquisition after the latter was approached by another potential bidder in April, says a report from Bloomberg, which cites sources familiar with the development. If Microsoft strikes a deal, it will get an additional $6 billion in annual cloud revenue, making it the biggest provider of Web-delivered software, and the software giant will move ahead in customer relationship management programs.

Despite the benefits, experts believe that acquiring Salesforce would be a challenge for Microsoft or any bidder. Mark Moerdler, an analyst at Sanford C. Bernstein & Co., said there are very few companies, including Oracle, which can close a deal this huge. Moerdler added that it will be expensive and complex, and there are possibilities that margins may come under pressure. In addition, there will be high integration costs to accommodate a business the size of Salesforce.

Moerdler mentioned that it will take too much time and costs and have more issues, and such pains will only be worth it if the deal provides the bidder with significant synergies. Both Moerdler and some Microsoft shareholders think they would prefer that the money be used in paying higher dividends or making share repurchases.

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