Salesforce.com Inc, a cloud-based software firm, is in talks to acquire Slack Technologies Inc’s workplace messaging app as it aims to extend its services to companies, people familiar with the matter said on Wednesday.
In the face of fierce competition from Microsoft Corp’s teams and other workplace applications, Salesforce’s plan comes as Slack struggles to completely capitalize on the transition to remote work during the COVID-19 pandemic.
Slack shares finished trade at $29.57 on Tuesday, well below the $42 peak, they hit last year on their first day of trading.
The potential acquisition is seen by Salesforce as a logical extension of its enterprise offerings, the sources said. It was not possible to know the price it paid for Slack, although one of the sources said Salesforce would pay cash for the deal rather than use its stock as currency.
An agreement could be reported before Slack announces quarterly earnings on Dec. 9, one of the sources said if the talks end successfully.
Shares in Slack Technologies soared 24 percent to $36.58, giving the firm a $21 billion market capitalization, while Salesforce fell 2.7 percent after the Wall Street Journal first announced that the two firms had held deal talks.
To keep their employees connected during the pandemic, Slack has benefited from businesses relying more on information technology systems.
According to analytics company Sensor Tower, its software has been installed about 12.6 million times so far this year, up approximately 50 percent from the same timeframe in 2019.
But Slack has been pressured by the economic fallout of the virus outbreak to offer discount and payment concessions to several of its customers who had to make cost cuts.
Some businesses have also turned to teams looking to save money, which comes with many of Microsoft’s office software packages.
“I think Microsoft Teams has been able to capitalize on the opportunity better than Slack, partly because they give it away for free as a bundle,” said Rishi Jaluria, an analyst at DA Davidson and Co., a research company.
“Now Slack realizes that they might be able to get greater penetration as part of a larger company.”
In the three months to the end of July, Slack’s billing rise, a key indicator of future sales, slowed.
In the meantime, Salesforce has prospered financially through the pandemic. It increased its annual sales estimate in August as the pandemic sparked demand for its online business software that supports remote work and commerce.
Through acquisitions, Salesforce has expanded its cloud business and invested more than $16 billion last year to fend off competition from competitors such as Oracle Corp and German rival SAP.