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Salesforce to Buy Tableau: ETFs in Focus

Sweta Killa

In a fight to gain market share in analytical and visualization business, Salesforce.com Inc CRM agreed to buy big data firm Tableau Software DATA for $15.3 billion in an all-stock deal. It will be the biggest acquisition in Salesforce’s history.

Per the terms of the deal, Tableau shareholders will get 1.103 Salesforce shares for each Tableau share, valuing the offer at $177.88 per share as of Jun 7 close, a 42% premium. The transaction, which has been approved by the boards of directors of both companies, is expected to close in the third quarter (read: Dow Sees Best Week Since November: ETFs in Focus).

The acquisition will bolster Salesforce’s competitive position with relative to software giants like Microsoft Corp. MSFT and Oracle Corp ORCL in business intelligence tools.

The deal is expected to add $350-$400 million to fiscal 2020 revenues, which are expected in the range of $16.45-$16.65 billion, up 24-25% year over year.  However, it will dilute fiscal 2020 operating margin by 75 basis points year over year and non-GAAP earnings per share by 37-39 cents. Non-GAAP earnings per share are projected to be in the range of $2.51-$2.53 for fiscal 2020.

Market Impact

Following the announcement of the deal, shares of DATA climbed 33.7% to close the as nearly 14.3 million shares moved hands compared with 1.3 million on average. Meanwhile, shares of CRM were down 5.3%. The news also sparked a rally in software companies despite lofty valuations (read: ETF Winners & Losers of Last Week).

The deal has put the spotlight on ETFs having large exposure to Salesforce.

iShares Expanded Tech-Software Sector ETF IGV

This ETF provides exposure to the software segment in the technology and communication services sectors by tracking the S&P North American Expanded Technology Software Index. Holding a basket of 88 securities, salesforce.com takes the third spot with 8.34% share. The fund charges 46 bps in annual fees and has AUM of $2.6 billion. Volume is good as it exchanges around 471,000 shares a day. IGV has a Zacks ETF Rank #1 (Strong Buy) with a High risk outlook.

First Trust Dow Jones Internet Index FDN

This is one of the most popular and liquid ETFs in the broad tech space with AUM of $8.6 billion and average daily volume of around 690,000 shares. The fund targets the Internet corner of the broad technology segment and follows the Dow Jones Internet Composite Index. Holding 42 stocks in its basket, CRM occupies the fifth position at 5.01%. The product charges 53 bps in fees per year and has a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: Tech ETFs Plummet on Antitrust Scrutiny Fears).

ERShares Entrepreneur 30 ETF ENTR

This fund offers exposure to U.S. large-cap entrepreneurial companies with the highest market capitalization and composite scores based on six criteria. This can be easily done by tracking the Entrepreneur 30 Index. Holding 82 stocks in its basket, Salesforce takes the fifth spot at 4.7%. About 31% of portfolio is tilted toward technology while communications, consumer discretionary and financials also receive double-digit exposure each. ENTR has accumulated $74.7 million in AUM. It charges 49 bps in annual fees and trades in lower volume of 3,000 shares a day on average.

First Trust Cloud Computing ETF SKYY

This fund provides exposure to cloud-computing securities by tracking the ISE Cloud Computing Index. Holding about 28 stocks in the basket, CRM takes the tenth spot at 4.7% of the assets. The product has been able to manage $2.2 billion in its asset base while seeing a good volume of about 297,000 shares a day. It has 0.60% in expense ratio and a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Play the Cloud Computing Boom with These ETFs).

Invesco Russell Top 200 Pure Growth ETF PXLG

This ETF offers exposure to the growth corner of the broad market by tracking the Russell Top 200 Pure Growth Index. It holds 60 securities in its basket with Salesforce taking the second spot at 4.05% share. The fund has amassed $228.1 million in its asset base and trades in a volume of 63,000 shares a day on average. PXLG charges 39 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.

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