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Salesforce (CRM) Stock Drops, Company Buys Vlocity for $1.33B and Its Co-CEO Steps Down

An American cloud-based software company Salesforce.com Inc. (NYSE: CRM) announced it bought Vlocity for $1.33 billion – all cash.

This interesting acquisition, however, didn’t come as such a surprise. Vlocity is a company that makes six industry-specific CRMs on top of Salesforce. Those are communications, media and entertainment, insurance and financial services, health, energy and utilities and government and nonprofits. Salesforce Ventures acts also as an investor and we actually wonder, what took the two companies so long?

Founder and principal analyst at CRM Essentials Brent Leary explains Salesforce views this as an investment for spreading the overall business.

He said:

“Salesforce has been beefing up their abilities to provide industry-specific solutions by cultivating strategic ISV partnerships with companies like Vlocity and Veeva (which is focused on life sciences). But this move signals the importance of making these industry capabilities even more a part of the platform offerings.”

Founder and principal analyst at Constellation Research, Ray Wang, thinks that this deal is fantastic for Salesforce.

He commented:

“It’s a great deal. Vlocity gives them the industries platform they need. More importantly, it keeps Google from buying them and [could generate] $10 billion in additional industries revenue growth over next four years.”

Vlocity previously managed to raise approximately $163 million on its valuation of around $1 billion. That happened after its most recent round –

a $60 million Series C last March. Even though some investors thought of $1.33 billion being somewhat less than expected, given what Vlocity is providing the company, Wang said it’s because Vlocity needed Salesforce more than the other way around.

Just year ago, Vlocity was valued at $1 billion. So, selling it for $1.33 billion after raising $163 million means it got 8.2 times more total invested capital ($1.33 billion/ $163 million invested capital), which actually doesn’t sound that bad.

Founder and CEO of Vlocity David Schmaier thinks that this is a positive thing for his company.

He wrote:

“Upon the close of the transaction, Vlocity, this wonderful company that we, as a team, have created, built, and grown into a transformational solution for six of the most important industries in the enterprise, will become part of Salesforce.”

The deal is expected to be predicated on regulatory approval and close sometime during Salesforce’s second quarter in fiscal 2021.

Salesforce yesterday also announced that Keith Block, the company’s co-CEO, is stepping down. The company’s founder Marc Benioff, therefore, becomes the CEO and chair of the company.

Block became co-CEO role in 2018, after a long career at Oracle. He left there in 2012 after the leakage of documents in which he criticized then-Oracle CEO, Mark Hurd. For the time being, Block will stay on as an advisor to Benioff.

He says in his letter:

“It’s been my greatest honor to lead the team with Marc [Benioff] that has more than quadrupled Salesforce from $4 billion of revenue when I joined in 2013 to over $17 billion last year. After a fantastic run I am ready for my next chapter and will stay close to the company as an advisor. Being side-by-side with Marc has been amazing and I’m forever grateful for our friendship and proud of the trajectory the company is on.”

Yesterday the stock closed at $181.27, which indicated a 2.51% fall. In teh pre-market, the stock continued its way down. At the moment of writing, its price is $177.50. It means that the stock has lost over 2% more.

Among the most possible reasons for this drop that are named by experts are disappointing earning. But let’s also not forget about the overall stock market situation.

Salesforce (CRM) Stock Drops, Company Buys Vlocity for $1.33B and Its Co-CEO Steps Down

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