Thursday, December 3, 2020 [Tweets] [Favorites]

Salesforce Buys Slack

Ron Miller and Alex Wilhelm (Hacker News):

Salesforce, the CRM powerhouse that recently surpassed $20 billion in annual revenue, announced today it is wading deeper into enterprise social by acquiring Slack in a $27.7 billion megadeal. Rumors of a pending deal surfaced last week, causing Slack’s stock price to spike.

[…]

Ultimately, Slack was ripe for the taking. Entering 2020 it had lost around 40% of its value since it went public. Consider that after its most recent earnings report, the company lost 16% of its value, and before the Salesforce deal leaked, the company was worth only a few dollars per share more than its direct listing reference price. Toss in net losses of $147.6 million during the two quarters ending July 31, 2020, Slack’s uninspiring public valuation and its winding path to profitability and it was a sitting target for a takeover like this one.

[…]

Slack was founded in 2013, but its origins go back to an online multiplayer game company called Glitch that was founded in 2009. While the game was ultimately a failure, the startup developed an internal messaging system in the process of building that company that later evolved into Slack.

mullingitover:

They started out trying to make an MMO, ended up making Flickr instead.

Then they tried making another MMO, but ended up making Slack instead.

I really hope they get cracking on another MMO soon.

Allen Pike:

Salesforce acquiring Slack feels like another “End of the Beginning” moment. Startups used to overturn established tech giants on a regular basis. Increasingly that just isn’t happening anymore – or at least, not often. A new era is upon us.

Matias Korhonen:

If you can’t make money with a communication tool during a global pandemic that has forced almost everyone who possibly can work from home to work from home, what will it take?

Casey Newton:

Slack’s life as an underdog darling of Silicon Valley ended on November 2, 2016. That’s when the upstart communication startup published an open letter to Microsoft in the New York Times, offering the tech giant an insincere “welcome” to the world of workplace chat software. The occasion was Microsoft’s launch of Teams, a Slack clone that would come bundled with the company’s popular Office 365 suite of products.

In its letter, Slack warned Microsoft that “Slack is here to stay,” adding: “we’re just getting started.” But the 4 million users it had at the time would increase to just 12 million four years later, while Microsoft — which added Teams to its 365 bundle without increasing the price — took Teams from zero to 115 million users.

John Gruber:

Slack, as a public company, has been under immense pressure to do whatever it takes to make its stock price go up in the face of competition from Microsoft’s Teams[…] Slack, it seems to me, has been pulled apart. What they ought to be entirely focused on is making Slack great in Slack-like ways. Perhaps Salesforce sees that Slack gives them an offering competitive to Teams, and if they just let Slack be Slack, their offering will be better — be designed for users, better integrated for developers.

Om Malik:

As an angel investor in the company, I felt compelled to write about why Slack mattered? Well, I never really published the piece. Thinking about it — it doesn’t matter: it is still relevant today, as it was then, for it is about why Slack mattered enough for Benioff to pony up more dollars than what Microsoft paid for LinkedIn.

[…]

So, when I saw the early version of Slack, I was intrigued by its possibilities as a messaging platform that wasn’t really an email, but an API to carry notifications for different kinds of corporate applications.

Update (2020-12-16): John Gruber:

I do love me an annotated press release. There’s well-warranted snark about some of the language, but also some astute analysis of why this deal makes sense for both companies[…]

3 Comments

In its letter, Slack warned Microsoft that “Slack is here to stay,” adding: “we’re just getting started.” But the 4 million users it had at the time would increase to just 12 million four years later, while Microsoft — which added Teams to its 365 bundle without increasing the price — took Teams from zero to 115 million users.

It’s a classic 1990s’ Microsoft move:

bundle a new product with existing, already-entrenched products (IE and WMP with Windows, Teams with Office 365)
start it in a mediocre way (to the point where Netscape and Slack don’t quite take you seriously yet), but just about good enough that folks try it out, then iterate, iterate, iterate

I’m of two minds about it. On the one hand, more than two decades later, we still haven’t really found a good antitrust answer to this. Is this move OK? Few companies other than Microsoft would have the chance to pull it off. (Adobe maybe could have, but squandered it so incredibly that nobody is even talking about Connect any more.)

On the other hand, while I miss Adium and am annoyed with a lot of chat functionality, I can’t deny that, overall, Teams is pretty good.

Congrats to Butterfield -- I assume he learned good lessons when he sold Flickr and got an even better personal payout for Slack. I vaguely remember reading blog posts from him way back at the early stages of Flickr when they were barely making ends meet. I don't know him personally, but I got the feeling back then that he was a good guy who was taking risks that he hoped would make the world a better place (compared to say, Zuckerberg... yech).

As for Teams, while there's no doubt a lot of overlap with Slack, it does serve a big part of the market that would never ever use Slack (my wife's workplace, for one) -- especially now that all kinds of users are forced to figure out how to collaborate online due to COVID. I don't think Slack will have any problem selling to the segment of the market that wants a better tool which is more advanced than Teams. MS always leaves huge holes for others to fill.

[…] M&A activity in 2020. Not only did it announce the third largest deal of 2020 with the $27.7 billion deal with Slack and the $1.3 billion deal for Vlocity, but it also engaged in a few “smaller” […]

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