(Reuters– Cloud software company Salesforce.com is in talks to acquire the workplace messaging app Slack as it seeks to expand its offerings to businesses, people familiar with the matter said on Wednesday.
Salesforce’s offer comes as Slack struggles to fully capitalize on the shift to remote work during the COVID-19 pandemic in the face of fierce competition from Microsoft teams and other work apps.
Slack shares finished trading on Tuesday at $ 29.57, well below the high of $ 42 reached on their first day of trading last year.
Salesforce sees the potential acquisition as a logical extension of its corporate offerings, the sources say. The proposed price for Slack was not disclosed, although one of the sources said Salesforce would pay cash for the transaction, rather than using its shares as currency.
If negotiations are successful, a deal could be announced before Slack releases its quarterly results on December 9, one of the sources added.
Neither Slack nor Salesforce responded to requests for comment.
Shares of Slack jumped 24% to $ 36.58, giving the company a market cap of $ 21 billion, while Salesforce fell 2.7% after the the Wall Street newspaper reported for the first time that the two companies had negotiated a deal.
Slack took advantage of the fact that companies rely more on IT systems to keep their workers connected during the pandemic.
Its app has been installed around 12.6 million times so far this year, up about 50% from the same period in 2019, according to analytics company Sensor Tower.
But the economic fallout from the pandemic has forced Slack to give discounts and payment concessions to many of its customers who have had to cut costs.
Seeking to save money, some companies have also switched to Teams, which comes bundled with many office software from Microsoft.
“I think Microsoft Teams was able to take advantage of this opportunity better than Slack, in part because it gives it away for free as a bundle,” said Rishi Jaluria, analyst at research firm DA Davidson and Co.
“Now Slack realizes that they might be able to get more penetration as part of a bigger business.”
Slack’s billing growth, a key indicator of future revenue, slowed in the three months leading up to the end of July.
Salesforce meanwhile prospered financially during the pandemic. It raised its annual revenue forecast in August, as the pandemic boosted demand for its online business software that supports remote work and commerce.
Salesforce has bolstered its cloud business through acquisitions and spent more than $ 16 billion last year fending off competition from rivals such as Oracle and its German competitor SAP.
(Reporting by Greg Roumeliotis and Krystal Hu in New York, additional reporting by Subrat Patnaik and Eva Mathews in Bengaluru. Edited by Arun Koyyur and Jan Harvey.)