No more and no less than $27 billion. This is the impressive amount that Salesforce paid for the purchase of Slack, the communication platform used by thousands of companies around the world. The deal promises to be the most important of the year in the technology field, with the IPO of Airbnb being permitted, but it is also the focus of questions because of the particularly high price of the acquisition, which exceeds that of platforms such as Instagram, WhatsApp and Skype. Especially since Slack has recorded a not inconsiderable loss of revenue compared to 2020.
For now, for the two companies that are now coming together, this is all good news. “It’s a match made in heaven. Salesforce and Slack will shape the future of business software and transform the way everyone works in an all-digital world that works from anywhere,” said Marc Benioff, Salesforce President and CEO. Stewart Butterfield, CEO and co-founder of Slack said, “This is the most strategic combination in the history of software and I can’t wait to get started.
After the announcement of the acquisition, rumored since last week, Slack’s stock went up 20 percent. It all seems to be good news, although it has not been cheap. Paying $27 billion for a company is not a common figure, even in the high business world. Although Slack is an entity with a good reputation, it is clear that there is a strategy behind it.
In the period from January 2019 to 2020, Slack reported revenues of $630 million, according to its annual report published last March. However, operating losses amounted to $588 million, which is 93 percent of its total revenue. Last year, operating losses accounted for 38.5% of revenue, figures that show a clear increase in the company’s losses.
In the breakdown, Slack indicated that most of the operating expenses were allocated to Research and Development, for which they spent a total of 457,365 million dollars. In 2019, the amount for the same objective was much more limited at 157,538 million.
The company explained in the document that R&D expenses consist mainly of personnel costs. “Our efforts are focused on maintaining and improving existing Slack functionality and adding new features. We plan to increase the dollar amount of our investment in research and development in the foreseeable future as we focus on developing new features and improvements,” they said in their report.
One of the first thoughts after learning that Salesforce acquired Slack for $27 billion is why the software company has spent such a high amount of money on a company that has almost more losses than profits. But the business movement has its logic and it’s not the first time that a similar operation has been recorded within the sector.
For Salesforce there are many advantages. With the transaction, the company has put itself on a slightly better footing with its biggest competition, Microsoft. The Teams platform has been a direct challenge for Slack and also its enemy that it may face even in court.
This summer, Slack denounced Microsoft before the European Commission for including Teams to the rest of Office 365 tools. The company considered this practice as illegal and anti-competitive, and that it violates the laws of the European Union. “Microsoft has illegally linked its product Teams to its market-dominant Office productivity suite, forcing it to be installed by the millions, blocking its removal and hiding the true cost to business customers,” Slack said in a statement.