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Microsoft Not Interested In Salesforce

Written by on May 8, 2015

In news that should bring relief to Microsoft Corporation (NASDAQ:MSFT)‘s investors, Microsoft insiders appear to have confirmed that Microsoft is not weighing an offer for salesforce.com, the cloud-based Customer Relationship Management (CRM) company.

Bloomberg had reported that Microsoft was seeking a bid for Salesforce to preempt an offer for Salesforce by another would-be buyer.

All this buying-to-make-sure-the-other-guy-cannot-buy-it does not make economic sense for Microsoft at Salesforce’s current valuation of nearly $50 billion and a forward multiple of more than 100.

Last month, Oracle Chief Executive Safra Catz said her company could benefit if Microsoft or another rival bought Salesforce.

“It would cause a lot of disruption in that market and so I would view that as something that would be helpful to us, especially in the short or medium term, dependent on who it was,” Catz said. She declined to comment on whether Oracle had made an approach to buy Salesforce.

Another potential buyer for Salesforce has ruled itself out. SAP SE Chief Executive Bill McDermott said earlier this week his company has “zero interest” in its software rival.

“We have never bought something that was impaired and in decline,” he said, saying that Salesforce’s cloud computing software was becoming commoditized.

With both Oracle and SAP out of the running to acquire Salesforce, Microsoft need not waste a substantial portion of its cash holdings on acquiring the cloud-based company when Microsoft’s own cloud business including Azure are doing well.

Microsoft would be better off investing in adding more capabilities to its Azure offering and indeed that is what Microsoft is doing ensuring that Azure works not only with Microsoft’s operating systems but also with Linux, which is favored by enterprise clients more.

Microsoft’ main competitor in the cloud business is Amazon Web Services (AWS) which remains the clear leader in cloud computing for small and large companies.

However, with Microsoft’s decades-long relationships with enterprises and a comprehensive set of software solutions such as the Office 365 suite and data centers spread around the world, Microsoft is in a unique position to grow its cloud business.