What's going on?
Silicon Valley software darling Salesforce announced a $16 billion acquisition of data analytics firm Tableau on Monday – its biggest purchase to date.
What does this mean?
Salesforce’s software is focused on customer relationship management and Tableau brings fresh analytics to the table – helping Salesforce customers like Netflix and Southwest Airlines to better understand the data they’re amassing.
Salesforce is paying Tableau’s shareholders entirely in shares of itself; no cash is changing hands. Though Tableau’s investors can sell their new Salesforce stock if they want to cash out, they may choose to hang on: thanks to Salesforce’s other cloud-based additions, the company’s $20 billion revenue target, if met, may well be accompanied by greater share price-boosting profit.
Why should I care?
For markets: Tech companies are adding nuts and bolts.
Tableau’s stock rose on Monday – the deal values it 42% higher than the company’s price on Friday. Salesforce’s stock, however, fell 4%: a large purchase (even when paid for without cash) comes with risk. Salesforce likely hopes its acquisition will help it keep pace with rivals offering ever more services under one roof. Last week, Google bought a data analytics startup of its own for $3 billion; Microsoft snapped up LinkedIn in 2016 (which Salesforce also had its eye on), Github last year, and is now teaming up with Adobe to compete with… Salesforce. And stalwart IBM bought Red Hat last year in 2018’s biggest tech deal.
The bigger picture: United we stand.
Late on Sunday, another US conglomerate, United Technologies – which makes aircraft and jet engines – announced plans to unite with defense contractor Raytheon, creating the world’s second-biggest aerospace and defense company. Boeing’s currently number one, but its recent turbulence might allow rivals to swoop in. Aerospace and defense companies typically rely on government contracts – and with recession worries abound, Uncle Sam might tighten the purse strings. Potential synergies from the merger could help “Uni-theon” weather a forthcoming storm.