Wednesday 22 November 2017

Salesforce takes aim at e-commerce with $2.8bn Demandware buy

American tech billionaire Marc Benioff.
American tech billionaire Marc Benioff.

Cloud-based software maker said on Wednesday it would buy Demandware, whose software is used by businesses to run e-commerce websites, for about $2.8bn.

The deal would help Salesforce open a new front as it seeks to take more market share from traditional software providers such as Oracle and SAP AG, both of which already offer cloud-based e-commerce services.

The e-commerce market has been growing at a blistering pace as retailers expand their online presence, boosting demand for software that helps manage functions such as payment processing and inventory management.

Salesforce's cash offer of $75.00 per share represents a 56.3pc premium to Demandware's Tuesday closing.

The lofty premium indicates that multiple bidders were likely at the table for Demandware, Stifel Nicolaus & Co analyst Thomas Roderick said, naming Adobe Systems Inc ABDE.O and Oracle as the other possible contenders.

"We're not winning every deal, this is just the deal that we were actually able to get done," Salesforce Chief Executive Marc Benioff told CNBC in an interview.

Demandware's shares, which have fallen about 21pc in the past year, rose 55.9pc to $74.81 on Wednesday. Shares of Salesforce, considered a barometer for the cloud-computing industry, edged down 0.3pc.

Demandware, whose customers include Lands' End, L'Oreal SA and Marks and Spencer Group, has reported sales growth of more than 30pc for the last 10 quarters.

"I think Salesforce has effectively already won the CRM war - they need to stay out front in terms of innovation and they do need to have the broadest, deepest portfolio ... this was a blind spot for them," Wedbush Securities analyst Steve Koenig said.

Global spending on digital commerce platforms is expected to grow over 14pc annually to about $8.5bn by 2020, Salesforce said, citing research firm Gartner.

The deal, slated to close in Salesforce's second quarter ending July, is expected to increase the company's 2017 revenue by about $100m-$120m.

Salesforce had forecast fiscal 2017 revenue of $8.16bn-$8.20bn in May.

However, Salesforce said it now expected an adjusted profit of 93 cents-95 cents per share for the full year, down from its previous forecast of $1-$1.02.

BofA Merrill Lynch is Salesforce's financial adviser for the deal, while Goldman Sachs is advising Demandware.

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