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Salesforce Buys E-Mail House for $2.5 Billion

ExactTarget has 6,000 customers, including chi-chi accounts like Coke, Microsoft, Toyota, Coors, the Gap and Nike

Salesforce.com, the poster child of the cloud computing era, has agreed to pay a giant $2.5 billion – at an equally giant 53% premium – for ExactTarget, the Indianapolis-based company that got started very late in 2000 intent on stuffing marketing e-mails from mid-sized companies into people’s inboxes, something now called social marketing.

It currently sells the software that lets companies personalize mail shots and run ad campaigns.

Apparently the bidding was intense. Maybe Oracle and Microsoft were interested and drove up the price. The property will fit into Salesforce’s Marketing Cloud.

ExactTarget has 6,000 customers, including chi-chi accounts like Coke, Microsoft, Toyota, Coors, the Gap and Nike, but it isn’t making money. And it reportedly won’t for at least the next 19 months or so.

The news sent Salesforce shares down 8% because the price it’s paying for its biggest acquisition ever may depress its margins further than before.

Naturally Salesforce CEO Marc Benioff, who never seems to give a fig for profits, cast the purchase as the company’s most important acquisition ever.

He also said that Salesforce, which has spent $4 billion in five years on more than 40 deals, would probably rein in its buying spree for a year or 18 months.

Salesforce’s core business as a sales management software purveyor has slowed and it’s been compensating with acquisitions, a stratagem that makes it less popular on Wall Street.

“We couldn’t just keep making these small acquisitions,” Benioff said. “That strategy wasn’t working. We need to work even harder to become No. 1 in marketing.”

He’s hot to do a billion a year.

ExactTarget went public in March of last year on the New York Stock Exchange. Salesforce is taking it out for $33.75 a share. ExactTarget stock closed Monday at $22.10, indicating the spread.

The acquisition is expected to close by July 31.

It will raise Salesforce’s revenue for the fiscal year ending January 2014 by all of $120 million-$125 million and cost it about 16 cents a share. That would put Salesforce in the neighborhood of 31 cents to 33 cents a share on revenues of $3.96 billion to $4 billion. Analysts were thinking 48 cents on revenues of $3.87 billion but the downward guidance may have nothing to do with the acquisition.

Salesforce, which has about $3.1 billion in folding money, and securities that can be quickly liquidated, means to use the cash on hand and a term loan to pay for its new toy.

According to its CrunchBase profile ExactTarget between 2004 and 2011 raised at least a hefty $188 million from the investor set, who reportedly didn’t sell out when the company went public although most cashed out in a secondary offering in September for $22.50 a share, or dumped the stock for between $17 and $25 according to the Wall Street Journal.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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