Why Salesforce's megadeals still matter after earnings

Salesforce (CRM) is finding its way forward after Marc Benioff's software giant dished out almost $50 billion between 2018 and 2020 buying out just three big-name companies — Slack, MuleSoft, and Tableau.

"As the #1 AI CRM, with industry-leading clouds, Einstein, Data Cloud, MuleSoft, Slack, and Tableau, all integrated on one trusted, unified platform, we’re leading our customers into the new AI era," Salesforce CEO Marc Benioff said in a statement Wednesday following the company's second quarter earnings report.

Benioff clearly sees these acquisitions as part of Salesforce's AI grand plan. Although deals tend to fall out of the headlines once they are completed, Salesforce's monster deals still matter — even if Wall Street hasn't been pleased with them all.

"This has been a hot-button topic for investors for years now," Morningstar senior equity research analyst Dan Romanoff told Yahoo Finance. "It’s not just the Slack deal; there’s been a lot of frustration among shareholders. I don’t think anyone cares about a small acquisition, but when you’re doing that $27 billion acquisition of Slack, that’s when the frustration boils over."

Salesforce's largest-ever acquisition was for the workplace messaging platform Slack, a $27.7 billion deal that was first made public in 2020. A year prior, Salesforce acquired data visualization software provider Tableau in 2019 for $15.7 billion. And in 2018, Salesforce acquired software integration platform MuleSoft for $6.5 billion.

Looking ahead, there probably are not too many multibillion-dollar deals in Salesforce's near future. Benioff told Yahoo Finance earlier this year that Salesforce is backing off M&A for now.

"They've gone on a diet on M&A," Jefferies analyst Brent Thill told Yahoo Finance Live Thursday.

During this earnings cycle, analysts have been noticing the benefits of an increasingly integrated Salesforce.

On Wednesday, Raymond James' Brian Peterson wrote that there's "nothing slow about 'MuleSoft'" as "multi-cloud continues to expand."

And Wedbush's Dan Ives added: "We also believe Benioff & Co. is making major strides around integrating Slack on the back-end into the broader CRM suite. ... The pipeline is finally starting to build on this key acquisition."

Slack tells us who Salesforce wants to be

Slack was undoubtedly the most controversial purchase in Salesforce's pre-pandemic shopping spree.

"The Slack deal is the most aspirational, and still the most confusing going forward," Needham senior research analyst Scott Berg told Yahoo Finance.

Slack CEO Lidiane Jones — who took the helm in December, succeeding Slack co-founder Stewart Butterfield — explained what makes Slack and Salesforce fit.

"My belief is that Slack should be the primary front door for every one of these business users and that your Salesforce interactions ... all of them can happen in Slack," Jones told Yahoo Finance. "The idea is that we can kind of leapfrog productivity."

There are already cases where this vision is starting to come to fruition, Jones added.

"Slack is very scalable, and we have incredibly large customers using Slack today," she said. "ShipIt, for example, is the entire logistics arm of Target, and they're running everything on Slack. ... We're very well equipped to embrace larger enterprise customers."

The vision is for a more consumer-facing Salesforce, but not everyone is sold yet.

Berg said that, while the front-door theory might work out over the long term, in the near term, it still has a ways to go.

"Slack today is still sold through a separate Salesforce because Salesforce reps can’t necessarily sell Slack right now — it’s too different of a product," Berg said. "Slack doesn’t bring customers to your website."

MuleSoft and Tableau

Though all of Salesforce's acquisitions are in very different places, it's clear that it has structurally set up ways for them all to be in communication as they wade through their next phases.

"I think MuleSoft makes sense strategically, having MuleSoft as a tool you can have help deploy your software, making installation as easy as possible," Romanoff said.

"Tableau starts to make less sense to me, but it does fit into the model of: 'Oh, let's buy something we can plug into our Salesforce,'" Romanoff added. "I think it's debatable how much sense Tableau makes, it's certainly not an obvious home run in the way that earlier acquisitions like ExactTarget [acquired in 2013 for $2.5 billion] were."

For his part, Tableau CEO Ryan Aytay "absolutely" believes Salesforce and Tableau are a fit. "It's critical because many of our customers overlap," he said.

And for MuleSoft CEO Brent Hayward, the proof is in how the company has scaled so far.

"I remember sitting at a conference with our entire company before the acquisition and seeing that we would have to grow 40% to 50% annually to hit that billion-dollar mark," Hayward told Yahoo Finance. "We were calling it our moonshot — and now we're sitting at $2 billion."

Though there was talk of divesting deals like Slack in the furor of an activist standoff earlier this year, that's simply not happening.

"To me, divestiture is out of left field, that doesn’t happen in software," Romanoff said. "Salesforce still sees itself as a growth company, and all these companies are still growing nicely within Salesforce. These deals are still relevant. ... They're part of this new chapter of Salesforce as a growth company rather than a hyper-growth company."

Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks.

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