| Stock | Price | 52 Week Range | Marketcap | EPS | Dividend Yield | Chart (24H) | Sector | Employees | Last Updated |
|---|---|---|---|---|---|---|---|---|---|
| $246.00 | 235.18B | 6.39 | 0.68% | Technology | 76,453 | 3 hours ago | |||
| $241.28 | 224.76B | 6.20 | 2.81% | Technology | 270,300 | 3 hours ago |
In the high-stakes world of tech investment, two titans, IBM and Salesforce, are making significant waves with their newest acquisitions, placing big bets on the cloud. The landscape of cloud computing is vast and lucrative, offering untold potential for businesses looking to leverage software over the web, negating the need for cumbersome in-house installations. The spotlight today is on IBM’s landmark purchase of SoftLayer, and Salesforce’s big-ticket buy of ExactTarget—both strategic moves that exemplify a growing trend among tech giants cementing their foothold in the cloud sector.
Editor's Note: Analysis and insight for this article were originally sourced sourced from our friends at Fool.com
Salesforce (CRM): Vision Realized with Cloud Coup
Salesforce’s acquisition of ExactTarget for a jaw-dropping $2.5 billion is a clear signal of its unwavering commitment to the cloud. ExactTarget, a frontrunner in the marketing software as a service (SaaS) arena, is a natural fit for Salesforce’s vision of a cohesive cloud ecosystem.
ExactTarget’s Profile:
Known for their cutting-edge digital marketing solutions, ExactTarget has been a cornerstone in SaaS marketing, offering the tools businesses need to engage and expand their customer base effectively. With capabilities in email marketing, data analysis, and customer engagement, ExactTarget’s portfolio aligns perfectly with Salesforce’s strategic goals.
Deal Specifics:
The $2.5 billion acquisition price included a 53% premium on ExactTarget’s market valuation, a hefty sum that underscores Salesforce’s aggressive growth agenda. This move raises eyebrows given ExactTarget’s recent streak of unprofitability—unprofitable since 2008, to be precise. Critics argue the premium is exorbitant, potentially overstretching Salesforce’s capital resources.
According to the Financial Times, SoftLayer’s acquisition cost was approximately $2 billion for IBM, with an estimated $400 million in annual revenue from SoftLayer. Compare that to Salesforce’s acquisition of ExactTarget with $317 million in trailing-twelve-month sales at a price tag of $2.5 billion and a price-to-sales ratio of 7.9. Salesforce’s aggressive spending illustrates a fervent belief in the long-term profitability of enhancing their SaaS offerings even without immediate financial returns.
Financial Implications:
Despite the concerns, this acquisition is quintessential to Salesforce’s DNA, expanding its cloud-based offerings and enhancing its ability to provide integrated marketing solutions. While some investors might be wary of the hefty price tag and immediate financial returns, the long-term growth prospects are tantalizing. Salesforce’s history of strategic expansions lends credence to its unrelenting pursuit of market dominance.
Analyst Ratings and Forecasts:
| Category | Value |
|---|---|
| Consensus Rating | Overweight (Buy) |
| Average Price Target | $315.44 |
| Potential Gain | 14.1% |
| Number of Ratings | 44 |
Summary of Analysts’ Outlook:
Analysts are overwhelmingly bullish on Salesforce.com, with 34 out of 44 analysts recommending a “Buy” or “Overweight” rating. The average price target of $315.44 suggests a potential gain of 14.1% from the current price. Analysts are upbeat about the company’s continued growth momentum, driven by its leadership in the cloud-based customer relationship management (CRM) space and its expanding product portfolio.
IBM (IBM): Pragmatic But Potent Cloud Moves
Not to be outdone, IBM’s strategic acquisition of SoftLayer for $2 billion marks a pivotal shift towards cloud computing. This move is emblematic of IBM’s forward-thinking adaptability in response to shifting IT paradigms.
SoftLayer’s Profile:
Privately held SoftLayer specializes in cloud infrastructure and platform services, with a notable revenue stream estimated at $400 million annually. Their robust infrastructure supports both public and private cloud environments, making SoftLayer a valuable asset in IBM’s growing cloud portfolio.
Deal Specifics:
IBM’s $2 billion investment illustrates a deliberate strategy, poised to elevate IBM’s cloud revenue to $7 billion annually by 2015. Unlike Salesforce’s aggressive premium, IBM’s approach is more measured and calculated, demonstrating their long-standing emphasis on maximized shareholder value.
Financial Implications:
The prudent investment is characterized by a conservative price-to-sales ratio of 5, reflecting IBM’s historical approach to strategic acquisitions. IBM’s strategic pivot, nearing $7 billion goals in cloud revenue, signifies not just a readiness to adapt, but a commitment to lead in a changing technology landscape. IBM’s established reputation and conservative pricing metrics provide a substantial safety net for investors wary of overly aggressive capital allocations, making it a safer bet in the burgeoning cloud market.
Analyst Ratings and Forecasts:
| Metric | Value |
|---|---|
| Consensus Rating | Overweight |
| Average Price Target | $144.44 |
| Potential Gain | 14.1% |
| Number of Ratings | 18 |
Summary of Analysts’ Outlook:
Analysts have a positive outlook on IBM, with a consensus rating of Overweight. The average price target of $144.44 suggests a potential gain of 14.1% from the current price. Most analysts believe that IBM’s strong fundamentals, including its leadership in artificial intelligence, cloud computing, and blockchain, will drive growth in the coming quarters.
These acquisitions come against a backdrop of economic uncertainty, particularly with fewer-than-expected job additions in May casting a shadow over the broader market sentiment. At 10:05 a.m. EDT, the S&P 500 was down 0.76%, and the narrower price-weighted Dow Jones Industrial Average was off by 0.51%. Such market tremors underline investor caution, even as IBM and Salesforce gear up for significant expansions.
Salesforce’s Strategic Acquisition:
While the cost is steep and profitability is initially nebulous, this acquisition promises to bolster Salesforce’s capacity to deliver robust SaaS solutions, aligning with their long-term growth vision. Investors with a high-risk tolerance might find this aggressive play enticing, betting on Salesforce’s historical aptitude for market adaptation and innovation. Should Salesforce maximize the integration of ExactTarget’s robust customer engagement tools, the resulting synergies could lead to unparalleled market presence in cloud-based marketing solutions.
IBM’s Strategic Acquisition:
In contrast, IBM’s acquisition of SoftLayer appears more rooted in pragmatism and long-term value creation. This move is less about immediate growth and more about strategic positioning in the evolving cloud computing landscape. For those seeking stability coupled with growth potential, IBM’s foray into the cloud might offer the perfect blend of security and upside. With a long-standing track record of creating shareholder value and a meticulous investment strategy, IBM’s approach offers a more measured path to capitalizing on cloud computing opportunities.
Investment Takeaway:
Ultimately, whether one opts for Salesforce’s high-octane growth strategy or IBM’s balanced, prudent approach depends on individual risk appetites and perspectives on the cloud computing boom. Both stocks symbolize the potent potential within the cloud sector, underscoring the imperative for tech giants to invest strategically to remain competitive.
As the cloud computing arena continues to expand and evolve, these acquisitions by IBM and Salesforce are harbingers of greater consolidation, innovation, and competitive positioning in the tech landscape. Investors would do well to keep a close eye on these developments, as they are poised to reshape the future of business IT itself.
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