Salesforce.com Inc. (CRM) announced that it completed the acquisition of social media monitoring tool provider Radian6, for roughly $340.0 million. The total purchase consideration includes $246.0 million in cash, $50.0 million in stock, as well as an additional $10 million in stock and $4 million in cash, which will be issued to the founders of Radian6, subject to vesting conditions over two years.
The enterprise social software market is expected to grow at a 5-year CAGR of more than 50%. Social media is now a global phenomenon, making its mark in every sphere and segment through brands such as Facebook (with over 500 million users), Twitter (more than 175 million users) and LinkedIn (over 100 million users). Consequently, the market for information, knowledge and networking management tools for social media is booming.
Radian6 has a vast product range, including the Radian 6 dashboard, which serves as a better platform for companies looking to monitor their social media effectively. Radian6 Engagement Console also connects companies with individuals and communities online. The combined entity will also bridge Facebook, Twitter and Chatter (salesforce.com's private, secure corporate social network) conversations.
Salesforce.com expects the deal to materially boost second quarter 2012 revenues by roughly $5.0 million, while reducing non-GAAP EPS by about 8 cents. For fiscal 2012, the deal is expected to be accretive to revenue by $45.0 million to $50.0 million, but dilutive to non-GAAP EPS by about 11 cents. The company now foresees FY12 revenue of $2.075 billion to $2.10 billion, with non-GAAP EPS of $1.24 to $1.27.
We believe the addition of the Radian product line will enrich Salesforce’s product portfolio, making it more attractive to customers. Moreover, the company will be able to capture the huge growth opportunity in media monitoring.
Salesforce is growing in size through continuous acquisitions. In January, the company completed the acquisition of the Web-based video conferencing company Dimdim for $31.0 million in cash. The acquisition will expand the company’s customer base, geographical exposure and market share.
Salesforce also completed the acquisition of cloud-based application solutions provider, Heroku for $212.0 million in cash. The company granted restricted shares worth $27.0 million and paid $10.0 million for unvested Heroku shares. This acquisition has enabled Salesforce to advance in the Cloud 2 platform. Heroku’s Ruby-based platform-as-a-service will allow Salesforce’s customers to easily develop advanced applications.
Despite all the prospects, we caution investors about strong competition in CRM application and cloud-computing areas. Google Inc. (GOOG) and Microsoft Corp. (MSFT) are worthy of special mention, since they have been fighting to win government clients at local, state and federal levels to use their online e-mail and other applications that fit into the cloud-computing space. Microsoft Corp. has gained market share from Salesforce.com in the Customer Relationship Management market.
Currently, Salesforce.com has a Zacks #4 Rank, implying a short-term Sell recommendation.
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