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Salesforce.com Stock Rises on Possible Tie-Up with Google

AP
Monday, 21 May 2007 | 5:46 PM ET

Salesforce.com's stock price climbed by more than 4% Monday in response to a report that the online software pioneer is poised to team up with Internet search leader Google in a double-barreled attack on Microsoft.

Although details are still being negotiated, the alliance would most likely involve blending Google mass-market applications like instant messaging, word processing and spreadsheets with Salesforce.com's business programs for managing customer relationships, according to The Wall Street Journal.

Microsoft , the world's largest software maker, competes in all those fields, making it logical for Mountain View-based Google and San Francisco-based Salesforce.com to draw upon their respective strengths to thwart a common rival.

A partnership makes so much sense that "it's not out of the realm of possibility that Google ends up buying Salesforce.com," said CIBC World Markets analyst Brad Reback.

Google is still trying to close its planned $3.1 billion acquisition of online ad service DoubleClick in what would be its largest deal in its 9-history. Buying Salesforce.com would cost even more, given the company's $5.5 billion market value.

In a Monday interview, Salesforce.com Chairman Marc Benioff reiterated his long-standing admiration of Google but declined to comment on any possible talks. "The enemy of the enemy is my friend," he said. "That makes Google my best friend."

A Google spokesman declined to comment Monday.

A formal announcement between the two companies is expected in early June.

Benioff, an outspoken advocate of distributing software applications over the Internet, has repeatedly depicted Microsoft as a lumbering dinosaur that he hopes to drive into extinction.

The topic surfaced during Salesforce.com's quarterly earnings conference call last week when Benioff told analysts his company already has been promoting Google's free alternatives to Microsoft's widely used suite of office applications.

"We're accelerating Google against Microsoft because we show customers that they can use Google apps, like Google spreadsheet and Google word processor instead of buying Microsoft Office," Benioff told analysts. "Microsoft doesn't like that."

Google has been promoting its applications more aggressively this year as it tries to give Web surfers more reasons to visit its site, where it makes most of its money from online ads. The company also is trying to create a new source of revenue by licensing an expanded suite of applications to corporate customers.

To underscore its ambitions, Google earlier this month embraced "Search, Ads and Apps" as its new theme.

Meanwhile, Salesforce.com has overcome initial skepticism to prove companies are willing to lease some applications over the Internet instead of going through the more cumbersome -- and often more expensive -- process of installing the programs directly on computer hard drives.

Founded near the height of the dot-com boom in 1999, Salesforce.com now boasts 32,300 customers and is expected to generate than $700 million in revenue this year. Benioff expects Salesforce.com's revenue to top $1 billion next year.

Salesforce.com's success has helped the company's stock price more than quadruple from its initial public offering price of $11 nearly three years ago.

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