It has been in the air for some days now that Slack was up for sale. And today, it’s a done deal.
On Tuesday, Salesforce announced that it would acquire Slack for $27.7 billion in cash and stock. The deal is the largest acquisition Salesforce has made in its 21 years history.
Slack went public on the 21st of June, 2019 and 15 months later it ends its run as an independent publicly-traded company. So much for a company, I tipped to become the Next Apple.
“Betting on Slack is betting that its product’s superiority and independence will beat Microsoft’s networking effects overtime.” Slack (NASDAQ:WORK): The Next Big Stock 1.
It seems that the key shareholders of Slack have come to the conclusion that their product’s superiority and independence will not beat Microsoft’s networking effect in time for them to stage a comeback. Hence, Salesforce’s acquisition of the company.
In July 2019, Microsoft Teams surged past Slack in number of daily active users, hitting 13 million. And in the first half of 2020, Microsoft Teams’ user base has grown to 75 million thanks to Covid-19 related work from home orders. While Slack’s daily active users hovers around 12 – 15 million.
The rate at which Microsoft’s Teams is growing in relation to Slack was a major concern for Slack’s Investors. As people were forced to stay at home, as a result of the lockdown restrictions, many work-from-home companies like Zoom grew exponentially but Slack didn’t. It did grow, albeit, it’s growth, in relation to other flying work-from-home stocks, was lackluster.
Perhaps, Slack would have been another Zoom or even better, without the fierce competition from Microsoft, a company with an established network.
Microsoft Teams is benefitting from Microsoft’s networking powers, adding massive numbers of users by leveraging its existing Office 365 customer base.
Microsoft gives free access to Teams premium features to Office 365 users that have already purchased Microsoft 360 premium plan. As such it’s a lot easier for Office 365 users to use Microsoft Teams as a default.
For Slack and its Executives, they felt that the playing field was not level because of Microsoft’s networking powers, a networking power that Slack’s CEO dimmed as anti-competitive behavior. Therefore, a deal was struck with Salesforce to give Slack (the app) a better fighting chance: To level the playing field, so to say.
The deal is supposed to be a win-win for everybody. Slack’s shareholders will get $26.79 in cash and 0.0776 shares of Salesforce stock in exchange for each share of Slack they own.
As much as it saddens me that Slack has been sold off, I feel that the deal is a ‘good’ deal for Slack (the app), hopefully, it will give it the benefits Instagram got with Facebook’s acquisition. And even more, Slack can now take on Microsoft head-on.
Will Slack become the next Instagram or the next WebEx?
Time will tell.
Henry John is a Technology Stock Analyst, with focus on companies developing cutting-edge techs.
Keeping track of cutting-edge techs, companies and stocks is what I do almost everyday. And I love it. Whether it’s artificial intelligence, 5g, or autonomous vehicles; I’m all in.
I’m a self-made millionaire who made most of his money investing in technology companies while working in finance.
Yes! I owe it all to tech and finance.