Salesforce.com buys Salesforce.org, which is the only simple part
Salesforce.com Inc. buys Salesforce.org for $ 300 million, with money for the Salesforce Foundation and the low budgets Salesforce.org customers come to Salesforce.
Quite simply, right? Well, there will be nothing more straightforward from there.
In a deal announced Monday afternoon, Salesforce
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will acquire an independent entity created to sell discounted Salesforce software to non-profit organizations, schools, and other groups struggling to pay for high-value software. Salesforce.org, a public corporation, will instead become a business unit of Salesforce, while the Salesforce Foundation ̵[ads1]1; a nonprofit dedicated to donation to needy groups – will receive cash.
While all the talk of ideal and basic organizations leads to a warm feeling, it looks as if it has the potential to ultimately confuse either ideal customers or Salesforce investors. Initially, either Salesforce margins will likely take a hit or ideal customer – everything from the US Red Cross, Anti-Defamation League, local Goodwill Industries, Habitat for Humanity to Project Open Hand – could face price increases.
Salesforce suggested that price increases are not in immediate proximity. The company stated it plans to expand its current business model by continuing to offer free and highly discounted software to non-profit organizations and educational institutions worldwide, and promised greater access to Salesforce products.
Salesforce.org gives qualified customers a hefty discount on Salesforce.com software as a service. For example, according to the website, Salesforce.org offers Lightning, Unlimited Edition, as it says is the ultimate non-profit customer management software, for $ 72 a month, compared to a standard $ 300 a month bill, annually billed. [19659002] "It's a very nice business," said Mark Hawkins, Chief Financial Officer of Salesforce, to the few analysts who listened to the company's conference call on Monday. He said in 2018 that Salesforce.org had sales of $ 250 million, but with a low operating margin.
But Salesforce sounds like it will increase profit margins eventually, which probably means the bill is being sent to non-profit organizations and schools.
"This is a company that has a lower operating margin at this stage. But it will also be on the way and convergence over time to our overall selling price of sales insurance in the longer term," Hawkins says when asked by An analyst who said the deal seems a bit unusual for margins.
Salesforce admitted that this year's profits will hit a hit, even as Salesforce.org brings in $ 150 million to $ 200 million in additional revenue. This year with 20 cents per share, and the GAAP revenue will take a bigger hit, but it was not possible to offer an accurate figure. Shares dipped in late trading after the deal was announced.
Hawkins said Salesforce planned to "streamline areas of operational duplication ", which usually means job deletions, although nothing was said about it in particular, and a Salesforce spokeswoman refused to comment on the post of job reduction.
All the explanations that Salesforce failed to make Monday about this acquisition were the most confusing reason behind it. Salesforce has long been focused on philanthropy, thanks to founder and co-director Marc Benioff – a great philanthropy alone. But Benioff was completely absent from a conference call and there was no statement from him in the original announcement Monday.
Hours after the deal was announced Monday, Benioff's usually active Twitter feed was unusually silent about swallowing one of his pet projects by his original creation. The company did not say why Benioff was absent from the conversation.
When an analyst asked about the justification for the deal, Benioff's CEO Keith Block said that the move had been in the works for a while and the changed structure would eliminate some of the complexities of two different organizations while maintaining Salesforce's philanthropic missions.
"You want to see the numbers," Block says. "It's definitely worth doing."
The numbers Salesforce offered on Monday but give little reason to make a deal that could lead to some unhappy people, either on Wall Street or in non-profit organizations. If this is just an efficiency agreement to save some costs, customers must be prepared for price increases; If Salesforce hopes to make up for lower operating margins with a little extra revenue, it can't shape investors.
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