Every Reason Oracle & Microsoft Would (Or Would Not) Acquire Salesforce

In a report published Thursday, JMP Securities analyst Patrick Walravens offered the top reasons why Oracle Corporation ORCL and Microsoft Corporation MSFT would and would not acquire salesforce.com, inc. CRM

Why Oracle Would Buy Salesforce:

• Executive Chairman Larry Ellison wants to be the No. 1 player in the cloud space.
• As of February 28, Oracle had $44 billion in cash and marketable securities with another $10 billion in debt financing. The company will also generate over $11 billion in free cash flow over the next two quarters, implying the company has sufficient cash to proceed with an acquisition.
• Ellison is a "mentor" to Salesforce's CEO Marc Benioff.
• Benioff would be a suitable CEO for the combined company.
• Oracle acquiring Salesforce would ensure Salesforce continues running on the Oracle database.
• Oracle would improve its strategic position against Workday Inc WDAY and SAP SE SAP.
• Oracle's co-CEO Mark Hurd and Ellison have made comments lately about the prospects of surpassing Salesforce in cloud revenue, suggesting Salesforce has been "top of mind" for Oracle.
• Oracle's Fusion might not be as good as the company is suggesting.

Why Oracle Would Not Buy Salesforce:

• As of May 31, 2014, $35.2 billion of Oracle's cash was held by foreign subsidiaries.
• The price tag of an acquisition would be "expensive" if Salesforce demands at least a further 25 percent premium after Wednesday's run up in share price.
• A merger would be (in the words of a Salesforce partner) a "cultural disaster" as there is "bad blood" with a lot of the top leadership.
• There could be a risk of high non-renewal rates.
• Industry sources suggest that Oracle's President of Product Development, Thomas Kurian, "doesn't know apps."

Why Microsoft Would Buy Salesforce:

• Microsoft wants a bigger presence in the cloud.
• As of March 31, 2015, Microsoft has $95 billion in cash and short-term investments.
• Microsoft and Salesforce already have an existing partnership dating back to May 2014. Industry sources note a "very good collaboration on both sides."
• With Windows 10 coming out, an acquisition is a "good time" to capture more applications.
• Owning Salesforce and optimizing the platform for Windows Phone would make Microsoft Mobile an excellent default solution for enterprises.
• Microsoft has already demonstrated a willingness to be cross-platform with Azure.

Why Microsoft Would Not Buy Salesforce:

• As of June 30, 2014, $77 billion of Microsoft's cash and short-term investments was held by foreign subsidiaries.
• An acquisition would reduce Microsoft's operating margins.
• Microsoft seems to be "hitting its stride" and an acquisition would prove to be a distraction.