Monday May 21, 7:00 pm ET
J. Bonasia
Reports surfaced Monday that Salesforce.com (NYSE:CRM - News) and Google (NasdaqGS:GOOG - News) are in talks about an alliance aimed at mutual rival Microsoft (NasdaqGS:MSFT - News). The reports sent Salesforce shares up 9% before the stock closed up 4.3% at 47.76, a three-month high. The reports also sparked some favorable reaction from analysts.
"Such a partnership would be extremely reasonable and viable," said Brad Reback of CIBC World Markets.
Salesforce and Microsoft are increasingly facing each other in markets for enterprise software, especially for midsize and small businesses. Google and Microsoft most notably face off in online search, but Google has come out with some software products that also compete with Microsoft, the world's biggest software company.
The Wall Street Journal, citing unnamed sources, reported that Salesforce and Google are in talks to strike some sort of a partnership soon. Salesforce and Google declined to comment.
Analysts say Google and Salesforce could combine their online software into a more complete package for business users. They would take on Microsoft's Office, Dynamics and Live brands.
Broad Offerings
Analysts say Google and Salesforce could combine their online software into a more complete package for business users. They would take on Microsoft's Office, Dynamics and Live brands.
Broad Offerings
Google could offer users its desktop collaboration software for e-mail, chat, spreadsheets, word processing and calendars. Salesforce could provide online services to help companies build and track customer relationships.
Salesforce does not want to build the word-processing, spreadsheet and other desktop software products that Google has been rolling out in recent months, says Brent Thill, an analyst with Citi Investment Research. Google lacks Salesforce's business applications. Citi rates Salesforce, Google and Microsoft stocks all buys.
"Salesforce wants to continue to focus on what they do well," Thill said. "Most of their success has come with midsize businesses."
Some analysts also expect that Apex, a software language developed by Salesforce.com, could be combined with other software from Google to create more business applications for AppExchange, an online marketplace for software programs that is hosted by Salesforce.com.
"With Google's existing success in consumer applications, an alliance with Salesforce would give them more presence in the enterprise space," said Trip Chowdry, an analyst with Global Equities Research.
Salesforce remains ahead of rivals in developing online applications for businesses, Chowdry says. Salesforce is a pioneer in on-demand software, or software as a service. Users don't license or buy packaged software for installation on their networks. Instead, they use it as needed, downloading it from Salesforce's network.
The on-demand style is counter to how Microsoft built its huge business, but Chowdry points out that Microsoft has come from behind many times. "Microsoft realizes they have to play catch-up," he said. "Don't rule them out yet."
New Area For Google
Google would likely benefit more than Salesforce from a partnership, says Peter Goldmacher, a Cowen & Co. analyst. Google lacks a strong foothold with enterprise customers, he says. He rates Salesforce stock neutral. Cowen & Co. has buy ratings on Google and Microsoft.
"Such a partnership would help to get Google's productivity applications into the customer base of Salesforce.com," Goldmacher said.
Both Google and Salesforce have built Web-based software businesses that pose a challenge to Microsoft's dominance, says Reback, who has neutral ratings on Salesforce and Google shares.
"With a partnership, Google would gain an entree into more enterprise customers, and Salesforce would get greater distribution among small and midsize businesses," he said.
A partnership would reinforce a widely held view that Google plans to battle more intensely with Microsoft, Goldmacher says.
"There are a lot of things to think about," he said. "One thing that's clear is that all three of these companies are moving much faster than their customers right now."
The partnership would likely improve integration between Google's e-mail applications and Salesforce's suite of customer relationship management programs, says Daniel Cummins, an analyst with Bank of America Equity Research.
"It could bring Salesforce into the spotlight at many organizations that Google targets," he wrote in a research note. Bank of America rates Salesforce a buy.
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