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MKM Looks At Whether Salesforce's Quip Purchase Was Intended As A Move Against Microsoft

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MKM Looks At Whether Salesforce's Quip Purchase Was Intended As A Move Against Microsoft

MKM Partners’ Kevin Buttigieg believes salesforce.com, inc. (NYSE: CRM)'s acquisition of Quip is being seen by many as an “offensive move” to go after Microsoft Corporation (NASDAQ: MSFT) with an Office competitor, following salesforce.com losing the bidding war for LinkedIn Corp (NYSE: LNKD).

Buttigieg maintains a Buy rating on salesforce.com, with a price target of $96.

The Quip Acquisition

“CRM's disclosure this week of the acquisition of privately held Quip for $582 million in stock plus a prior investment adds a cloud-based software of personal productivity apps, including spreadsheets, word processing and task lists that tightly integrates collaboration and communication capabilities,” the analyst mentioned.

As an “upstart” competitor of Microsoft Office, many are viewing this as an offensive move by salesforce.com, given that it lost the bidding war for LinkedIn.

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According to the MKM Partners report, “Both companies share a similar vision of a next generation of more intelligent workplace applications that likely served as the basis for their acquisition discussions in 2015 and that each are now pursuing independently.”

Offensive Or Defensive?

However, rather than attacking Microsoft, salesforce.com’s acquisition of Quip could be seen as more defensive, given Microsoft’s upcoming launch of Dynamics 365 in the fall of 2016.

Dynamic 365 integrates Office 365 with ERP and CRM apps, and can therefore leverage the success of Office 365 to improve enterprise application competition, even before the company mines intelligence from LinkedIn apps.

“So we see intensifying competition between MSFT and CRM that should play out over time but which has already seen the latter increase its acquisition activity and pressure near-term margin expansion,” Buttigieg stated.

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Latest Ratings for CRM

DateFirmActionFromTo
Aug 2019MaintainsBuy
Aug 2019MaintainsBuy
Aug 2019MaintainsOverweight

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