Dec 2, 2020 - Economy

Making sense of the $28 billion Salesforce-Slack deal

a slack logo gone awry

Illustration: Aïda Amer/Axios

As with most big deals in tech, the key question to ask about Salesforce's $28 billion purchase of Slack isn't whether the price is too high or low, but whether the combination makes sense.

Between the lines: Big Tech companies have plenty of their own cash and can easily borrow more, but only a finite amount of time to innovate before rivals capture their turf.

  • In explaining the deal to investors on a previously scheduled conference call, CEO Marc Benioff characterized the move as a bet that the pandemic-driven shift to remote work isn't a temporary blip but rather a permanent transformation.

The big picture: Benioff has long considered acquiring widely used business tools as a means to expand Salesforce's footprint beyond the sales and marketing teams and into the broader workforce.

  • Salesforce kicked the tires on Twitter and lost out to Microsoft in a bidding war for LinkedIn.

Slack has the lead in its still-nascent space, but was facing a challenge of its own — namely that Microsoft's rival Teams was bundled into Office subscriptions.

  • As a standalone company, Slack couldn't easily manage such a move, nor could it afford to get into a price war.

What they're saying: Box CEO Aaron Levie praised the deal, noting how Salesforce has grown beyond its initial goals of taking on Oracle and SAP.

  • "This isn't just about the future of 'collaboration,'" he wrote in a blog post. "This is a new 'operating system' for how knowledge workers will interact in the future, connecting the front office, back office, and customers all together in a single platform."

Yes, but: The death of a standalone Slack isn't just sad for customers who liked the upstart, but also a blow to those who held up the company as proof that small companies could still take on the Big Tech giants.

What's next: The deal still needs regulatory approvals and also a formal go-ahead from shareholders — although 55% of Slack's voting power is already committed to supporting the sale.

Go deeper: Salesforce's Slack deal resets the tech antitrust debate

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