Home / World / Salesforce.com buys Salesforce.org, and that’s the only straightforward part

Salesforce.com buys Salesforce.org, and that’s the only straightforward part



Salesforce.com Inc. is buying Salesforce.org for $ 300 million, and the money goes to the Salesforce Foundation and the low budget customers of Salesforce.org go to Salesforce.

Pretty simple, right? Well, there's nothing easier from there.

In an agreement announced Monday afternoon, Salesforce.

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will acquire an independent entity that was created to sell Salesforce software at a discount rate to non-profit organizations, schools and other groups struggling to pay for high-value software. Salesforce.org, a public benefit corporation, will become a Salesforce business unit, while the Salesforce Foundation, a non-profit organization dedicated to donate to needy groups, will receive the cash.

While everything that is talked about by nonprofits and foundations leads to a warm feeling, it seems to have the potential to enrage non-profit clients or Salesforce investors. Basically, Salesforce margins are likely to be affected, or non-profit clients, ranging from the American Red Cross, Anti-Defamation League, Goodwill Industries, Habitat for Humanity to the Open Hand Project, could face price hikes. .

Salesforce suggested that the price increases are not in the immediate perspective. The company said it plans to extend its current business model by "continuing to provide free and highly discounted software to non-profit institutions and educational institutions around the world," and promised greater access to Salesforce products.

Salesforce.org offers qualifying customers a large discount on Salesforce.com software as a service. For example, according to its website, Salesforce.org offers Lightning, Unlimited Edition, which says it is the best non-profit customer relationship management software, for $ 72 a month, compared to a standard price of $ 300 per month, billed annually.

"It's a really good business," Salesforce's finance chief Mark Hawkins told the few analysts who listened to the company's conference call Monday. He said that in 2018, Salesforce.org had revenues of $ 250 million, but with a low operating profit margin.

But Salesforce seems to want to increase the profit margin eventually, which probably means raising the bills that are sent to nonprofits and schools.

"This is a business that has a lower operating margin at this stage … But it will also be on a path and convergence over time to our overall operating margin for Salesforce in the long term," said Hawkins when asked by an analyst. He said that the agreement seems a bit dilutive to the margins.

Salesforce admitted that this year's earnings will be affected, even when Salesforce.org brings $ 150 million to $ 200 million in additional revenue. He lowered his forecast for adjusted earnings for this year by 20 cents per share and said GAAP earnings will have a greater impact, although he could not offer an exact figure. The shares sank in the final operations after the agreement was announced.

Hawkins said Salesforce planned to "streamline areas of operational duplication," which generally means job cuts, although nothing specifically was said about it and a Salesforce spokeswoman declined to comment on the record of job cuts.

Of all the explanations that Salesforce did not give on Monday about this acquisition, the most momentous reason was the most disconcerting. Salesforce has always focused on philanthropy, thanks to founder and co-executive director Marc Benioff, a leading philanthropist on his own. But Benioff was completely absent from a conference call and there was no statement from him in Monday's original announcement.

Hours after the agreement was announced on Monday, Benioff's typically active Twitter feed was strangely silent about the downfall of one of his favorite projects because of his original creation. The company did not say why Benioff was absent from the call.

When an analyst asked about the fundamentals of the agreement, Benioff's co-executive director, Keith Block, said the measure had been in process for some time and that changing the structure would eliminate some of the complexity of two different organizations, at the same time. that would maintain the Salesforce philanthropic mission. .

"You will see the numbers," said Block. "Definitely worth doing."

However, the numbers Salesforce offered on Monday offer little reason to make a deal that could lead some disgruntled people on Wall Street or the nonprofit accountant's offices. If this is just an efficiency agreement to save some costs, customers should be prepared for the price increases; If Salesforce expects to compensate for lower operating margins with a little extra revenue, that might not please investors.

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