LinkedIn, Microsoft and Salesforce have put the CRM industry into full view this year. Now the market watches to see how the moves these tech chiefs are making will not only affect this cutting edge industry, but also how they will impact their financials.
Standing for customer relationship management, this new era industry is all about helping businesses improve their operations. This industry thrives on data, which is why these three players and the outcomes of their efforts are so intertwined.
In a bidding war earlier this year, Microsoft (NASDAQ: MSFT) and Salesforce (NYSE: CRM) made a case to LinkedIn (NYSE: LNKD) as to why they were best to buy the professional networking company. In the end, it was announced that LinkedIn had chosen Mr. Softy, which offered $26.2 billion to acquire the company. That amounts to roughly $196 a share.
When it released its third quarter results in October, LinkedIn’s CEO, Jeff Weiner spoke of the impact of being bought by Microsoft.
“As we look forward, our combination with Microsoft creates the opportunity for us to dramatically increase the impact and scale with which we deliver value to our members and customers,” Weiner said.
Naturally, LinkedIn’s choice of Microsoft did not sit well with Salesforce, but few saw that it would begin an active campaign to make sure the Microsoft-LinkedIn deal did not come to fruition. As this article was written, Salesforce was attacking the deal, which had already been approved by U.S. and European regulators. Salesforce frets that Microsoft would stingily not share all the data it would be privy to once its acquisition of LinkedIn was complete.
What’s the value in LinkedIn
To be clear, the allure over LinkedIn is not over it being a social networking platform. The clamor to acquire LinkedIn is a matter of data. It is thought that other companies can use that information for everything from beefing up their own offerings and services to using it for artificial intelligence projects.
Specifically, Salesforce was hoping to use the data so that its salespeople could generate leads.
In complaining about Microsoft buying LinkedIn, Salesforce executives made it clear that this was a matter of the data that Microsoft would be in possession of through acquiring LinkedIn. Salesforce worries Microsoft will be able to deny competitors access to that data, and in doing so it would would have an unfair competitive advantage.
Observers hope for the best
During the quarter, LinkedIn notes that its platform continued to show strong engagement, powered by investments across mobile, messaging, content and jobs. Membership grew 18% year-over-year to 467 million, and unique visiting members grew 6% to an average of 106 million members a month, according to the company’s release on its earnings.
Last month, Morgan Stanley issued a report in which it pointed out Salesforce’s strength in the CRM space. Barron’s picked up on it, and noted Morgan Stanley recommends that investors “focus on the underlying fundamentals of the CRM industry.”
It’s unlikely Salesforce will be able to stop the Microsoft-Salesforce deal. In the meantime, its third quarter earnings are on tap for Nov. 17. When it reported its second quarter earnings, it projected that its revenue will be approximately $2.11 billion to $2.12 billion for the third quarter. That would be an increase of 23% to 24% year-over-year.