Salesforce Looks to Take a Bite Out of Microsoft
One of the summer’s biggest mergers sets salesforce up to compete with a market leader.
This year has been one for the record books as far as the market is concerned.
We’ve already discussed recently how 2021 has already seen more IPOs than any year before at Profit Pregame.
But there’s another market record that’s already been set, not even halfway through the year. As of early June, mergers and acquisitions around the world have already totaled $2.4 trillion – a year-to-date record and 158% increase from the same timeframe since last year.
The cause of the wave of merger deals can mostly be pinned on the fact that the Federal Reserve has continued to be very accommodative to the market, keeping interest rates low and allowing companies to cheaply borrow the funds needed for acquisitions.
On Wednesday another $27.7 billion was added to that total as one of the biggest and most highly anticipated mergers of the year was completed.
And the deal could create one of the biggest booms we’ll see in the tech sector in the coming months and years.
Where’s the money?
After clearing the final hurdle of a review of its merger by the Department of Justice, salesforce.com, inc. (CRM) closed its $27.7 billion deal to acquire Slack Technologies, Inc. (WORK).
The merger will allow salesforce to utilize the Slack communications platform as the new interface of its Customer 360 – a Salesforce tool used to access the company’s apps.
The move will provide customers with a single access point for all of their communication between both employees and customers.
The underlying goal in all of this is to directly compete with Microsoft Teams, the leading messaging service for businesses.
But even though the goal is to pull market share away from Microsoft, salesforce executives have publicly stated that they are willing to integrate Slack with Microsoft applications in an effort to assist customers above all else.
Salesforce is planning to host an event in August to share more details about the next moves for Slack and its integration into its systems.
But I wouldn’t wait until then to jump into this opportunity.
How do I get some?
I see the potential for big things for CRM now that they’ve completed their acquisition of WORK.
I love the fact that they’re willing to work with Microsoft. I think that will allow them to attract new customers that may not be willing to completely cut the cord with Microsoft, but instead add Slack’s benefits to their workflow.
But as with any investment, timing is crucial.
I think the short-term bottom is in as of last Monday for CRM after the DOJ dropped its investigation of the deal.
I have not seen anything on CRM on S.C.A.N., but the stock continues to move higher.
In the end, I believe this stock has a lot more room to move up as the potential of this merger translates into actual gains in market share and revenue, but in the short-term I’m concerned about topping this trade.
I would recommend waiting for a pullback before picking up shares of CRM, but ultimately this stock should continue to grow as the digital work trend alters the way that businesses connect both employees and customers.
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In the Spotlight: A massive investment in semiconductors
We’ve talked before here at Profit Pregame about the incredibly wide array of products that contained advanced microchips these days, and how the supply crunch of the semiconductor materials that they’re made from has slowed nearly every industry over the last year.
Well, yesterday we got the first inkling of a major move being considered that would help alleviate supply issues and get companies that rely on them back on track.
Reports began to surface yesterday that the U.S. government is developing plans to introduce a $52 billion spending bill to alleviate semiconductor supply issues.
While an initiative of that size would have to make it through both houses of Congress before it could be implemented, it represents the latest push to assist an industry that is vital to the economy.
While sales of electronic devices and products that house semiconductor chips have never been higher, share prices of semiconductor producers have been sluggish in making the gains that many analysts expected them to over the last year.
But that could play to our advantage, giving us a good buying position on semiconductor stocks governments around the world take measures to relieve supply chain constraints.
I’ll be taking another close look at the semiconductor industry, and I’ll be back with more trade recommendations as new opportunities present themselves. Stay tuned.