Slack (WORK) Stock Jumps 38% on News on Possible Acquisition by Salesforce

On Wednesday, November 25, shares of Slack Technologies (NYSE: WORK) spiked a whopping 38% on news of possible acquisition by Salesforce. As per the WSJ report, the two companies are in advanced talks and could announce the deal by next week.

On Wednesday closing, WORK stock was trading at $40.70 with a market cap of $23.2 billion. The stock has been trading sideways throughout 2020. However with Wednesday’s massive price surge, Slack’s year-to-date gainst stands close to 60%.

Moreover, the company hasn’t shown enough momentum as its other technology peers that picked-up massively amid the COVID-19 pandemic. The Morgan Stanley report last month noted that Slack is losing the market to big players like Microsoft Corporation (NASDAQ: MSFT) and Zoom Video Communications Inc (NASDAQ: ZM).

Well, it unclear as of now how much the deal is worth. However, Salesforce investors don’t look much excited about this news. Salesforce.com Inc (NYSE: CRM) stock tanked more than 5% on Wednesday. The San Francisco-based cloud computing giant Salesforce has been on a buying spree in recent times.

Two years back in 2018, Salesforce acquired MuleSoft for $6.5 billion. One year post that, in 2019, the company acquired data visualization company Tableau for a whopping $15.4 billion. Market analysts note that if Salesforce manages to get Slack in its kitty, this will be the company’s biggest-ever deal.

With Salesforce Slack Can Sustain Competition against Microsoft

As said, Slack has been facing major competition heat from Microsoft. In October 2019, the company also admitted that Microsoft is its biggest competitor. Back in 2016, Microsoft attempted to buy Slack for $8 billion but the deal didn’t go through. Later, Microsoft launched its Teams communication app. In a note to investors, Wedbush analyst Dan Ives said:

“This deal would be a major shot across the bow at Microsoft with the company’s Teams offering a direct messaging competitor against Slack that has been a clear hurdle to growth and now would be a two-horse race between Microsoft and Salesforce. For Microsoft this would competitively change the landscape and make Salesforce even that much more of a competitor.”

Constellation Research analyst Holger Mueller notes that the Slack acquisition can be a sticky revenue source for Salesforce. “Slack could be a good candidate to strengthen its platform, but more importantly account for more usage and ‘stickiness’ of Salesforce products – as collaboration not only matters for CRM, but also for the vendor’s growing work.com platform,” Mueller said.

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