Salesforce CEO: spending spree was not planned
CRM vendor saw revenue increase 25 per cent in Q2, but share prices still dropped
Salesforce had not planned to go on the M&A spree that has seen it lavish over $3bn on acquisitions this year, CEO Marc Benioff has revealed.
On a conference call following Salesforce's Q2 results, Benioff said that "big changes" in the market led to a change of heart, starting with a failed attempt to acquire LinkedIn.
Salesforce then went on to acquire e-commerce platform Demandware for $2.8bn and word processing software maker Quip for $582m.
"When we came into this year we didn't really have M&A on our forecast because when we look at doing M&A we look for really strategic, great companies that are one of a kind, and also that we are going to get at a great price," he said. "So we made a bid for LinkedIn and another company as you know, Microsoft, made a bid, and Microsoft outbid us.
"Then as the market continued to evolve, we had an incredible situation occur which is a company that we coveted for many years, Demandware, was all of a sudden approached by another company which tried to acquire Demandware.
"It came to our attention, would we want to buy them? We put in a bid for Demandware because, again, it's a great company."
Benioff added that he expected the merger and acquisition activity to end "probably at the end of this calendar year".
For the three months ending 31 July 2016 Salesforce saw revenue increase 25 per cent year on year to $2bn.
The software vendor has also increased its revenue estimates for the full fiscal year from between $8.16bn and $8.20bn to between $8.27bn and $8.32bn.
The revenue increase and revised annual revenue, however, were not enough to stop its share price tumbling by over seven per cent.
Angela Eager, research director at TechMarketView, said: "Light Q3 guidance was a main reason [for the share price drop] but a slight miss on deferred revenue plus the mass of acquisitions during the year to date - costing c$3.5bn vs c$60m during the whole of the previous financial year - will have played their part too."
Eager also highlighted lower-than-expected deferred revenue as a possible cause of the shares slide.