Why Some Salesforce Investors Didn’t Like Its Blockbuster Tableau Deal

Salesforce

The Salesforce logo is displayed in the top of their office building above Bryant Park as seen from the Empire State Building on May 7, 2019 in New York City. Gary Hershorn/Getty Images

Enterprise software giant Salesforce announced on Monday that is had sealed an all-stock deal to buy data analytics firm Tableau Software for a staggering $15.3 billion, the largest amount Salesforce has ever paid for an acquisition, as the company looks to deliver next-level data insights to its vast network of corporate clients.

As part of the deal, Tableau shareholders will get 1.103 Salesforce shares, worth $177.88 based on Salesforce’s closing price last Friday. In total, the acquisition price represents a 42 percent premium over Tableau’s market value. And naturally, the news sent Tableau stock to surge as much as 35 percent Monday morning to $169.50, an all-time high.

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Shares of Salesforce, on the other hand, tanked five percent during Monday’s early trading to $156.4—a sign that the blockbuster deal wasn’t taken too well by at least some of Salesforce’s investors.

Salesforce said the acquisition would boost its 2020 revenue “by up to $400 million,” but would decrease adjusted profit by up to 39 cents per share.

Some worry that the expensive buyout was to cover Salesforce’s own sign of weakness. “Salesforce shares are trading down, may be out of fears that the company is buying growth because organic growth is slowing. It’s a natural question to ask,” Steve Koenig, a Wedbush Securities analyst, said in a note to clients.

Others figured that there were better companies in the big data field for Salesforce to acquire. Forbes columnist and venture capitalist Peter Cohan, for example, contended that Palo Alto-based startup, ThoughtSpot, would have made a better acquisition for Salesforce because “it was growing much faster than Tableau” to a point where “it was taking business from Tableau.”

Cohan added that Tableau’s outlook of “a considerable slowdown” in revenue growth over the next five years could be an extra burden on Salesforce’s own pressure for further growth.

At its latest quarterly earnings call on May 2, Tableau’s CFO Damon Fletcher revised the company’s guidance for 2019 revenue growth from 20 percent to 19 percent after first-quarter revenue grew at a slower pace than Wall Street analysts had expected.

Tableau has about 86,000 corporate clients including Verizon, Netflix, Southwest and Schneider Electric. Salesforce has more than 150,000 clients and a subscriber base of 3.75 million.

“Tableau helps people see and understand data, and Salesforce helps people engage and understand customers,” Salesforce founder and co-CEO Marc Benioff said in Monday’s announcement.

The deal is expected to close in the third-quarter of 2019, after which Tableau will operate independently with its current leadership team headed by CEO Adam Selipsky.

“Joining forces with Salesforce will enhance our ability to help people everywhere see and understand data,” Selipsky said on Monday. “As part of the world’s No. 1 CRM company, Tableau’s intuitive and powerful analytics will enable millions more people to discover actionable insights across their entire organizations. I’m delighted that our companies share very similar cultures and a relentless focus on customer success.”

Why Some Salesforce Investors Didn’t Like Its Blockbuster Tableau Deal