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Will Microsoft fire back at Salesforce after its $27.7 billion Slack deal?

·Anchor, Editor-at-Large
·3 min read
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Microsoft is a beast of an organization with impressive market positions via businesses such as Office, LinkedIn, Skype, Xbox and more recently, Teams. So don’t expect the tech giant to spend recklessly on a splashy acquisition that takes aim at Salesforce’s (CRM) pricey purchase of communications platform Slack (WORK), tech watchers say.

“They [Microsoft] have a great product and a great presence. I don’t think they’ll react to the deal,” Piper Sandler tech analyst Brent Bracelin told Yahoo Finance Live.

But that doesn’t mean Microsoft (MSFT) won’t use its more than $140 billion in cash to bulk up in areas where it’s under penetrated, experts like Bracelin contend.

“Microsoft has less than 5% market share in front office applications and they have less than 5% in back office applications. That’s where we would see Microsoft look to expand their footprint. They would likely have to do that through acquisition,” added Bracelin.

To be sure, speculation on Microsoft’s response will run hot in the wake of Salesforce’s ground-shaking bazooka shot. The CRM giant said Tuesday after market close that it would acquire Slack in a cash and stock deal valuing the workplace communications service at $27.7 billion.

Salesforce will play a key role in scaling Slack up to more high-paying corporate customers in a major challenge to the momentum at Microsoft Teams and Azure. Indeed it also puts Microsoft’s email dominance at risk moving forward, too.

The way Salesforce founder Marc Benioff sees it, Salesforce (helped by new addition Slack) stands to become the “central nervous system” of the corporate office — in effect supplanting Microsoft.

Marc Benioff, founder, chairman and co-CEO of Salesforce, speaks at an Economic Club of Washington luncheon in Washington, DC, on October 18, 2019. (Photo by NICHOLAS KAMM / AFP) (Photo by NICHOLAS KAMM/AFP via Getty Images)
Marc Benioff, founder, chairman and co-CEO of Salesforce, speaks at an Economic Club of Washington luncheon in Washington, DC, on October 18, 2019. (Photo by NICHOLAS KAMM / AFP) (Photo by NICHOLAS KAMM/AFP via Getty Images)

“Wow, the demonstration is incredible, and what I saw, I think, is going to just truly excite our customers, and they're going to have the ability to have a next-generation capability for their companies,” Benioff told Yahoo Finance following the deal.

That would be powered by Salesforce Customer 360, which allows the company to bring together fragmented parts of a business like sales, marketing, commerce, service, etc. into a single source of truth.

Benioff believes that adding Slack as the new interface for Customer 360 is the “icing on the cake.”

“Despite the rich multiple paid for Slack, we believe Salesforce can turbo charge enterprise adoption for Slack through its distribution system and bring more users to its platform. We think there is more than enough room in the collaboration space for a two horse race — Microsoft and Salesforce,” Jefferies tech analyst Brent Thill said.

Perhaps, but the ball now is clearly in Microsoft’s court.

Yahoo Finance’s Julia La Roche contributed to this story.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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