Salesforce buys Demandware for $2.8 billion in commerce push

  • Bloomberg.
  • Wednesday, June 1, 2016 1:14pm
  • Business

Salesforce.com Inc. is entering the e-commerce industry with a suite of cloud-based services via its biggest acquisition yet, bolstering competition with rivals Oracle and SAP.

Salesforce agreed to buy Demandware Inc., whose cloud-based software is used by companies to run their e-commerce websites and manage store operations, for about $2.8 billion. San Francisco-based Salesforce will start a tender offer for all outstanding Demandware shares for $75 each in cash, the companies said in a statement Wednesday. That’s a 56 percent premium over Demandware’s closing shares Tuesday.

Chief Executive Officer Marc Benioff — in an ongoing challenge to the biggest players in business software — is looking for new ways to propel sales after slower growth at Salesforce in recent years. With Demandware, Salesforce is pushing into a fast-growing market that’s forcing companies to rethink how they sell their products. E-commerce is expected to make up 12.5 percent of retail sales in the U.S. by 2020, up from less than 7 percent in 2014, according to EMarketer Inc.

“If you look at consumer spending, most of it is moving to e-commerce,” said Abhey Lamba, an analyst at Mizuho Securities USA Inc. “This thing gives them another area of opportunity.”

The acquisition creates a new product line for Salesforce and will allow the company to create “yet another billion-dollar cloud,” Benioff said.

The deal is expected to increase Salesforce’s revenue by about $100 million to $120 million in fiscal 2017. Operating margins for this year will expand after the deal, Chief Financial Officer Mark Hawkins said on a conference call to discuss the transaction. The transaction is expected to be completed by the end of July.

“The only blind spot we had in CRM was commerce,” Chief Product Officer Alex Dayon said, referring to customer relationship management. “The future of commerce is really with solutions like Demandware where not only do you provide personalized one-to-one shopping experience on your phone, on the web, but you’re also connecting the store into that experience.”

Demandware’s clients include L’Oreal and Marks &Spencer Group.

Salesforce shares fell 0.2 percent to $83.52 at 11:30 a.m. in New York. They were up 6.8 percent this year through Tuesday, outpacing the 2.6 percent increase in the Standard &Poor’s 500 Index. Demandware surged 56 percent to $74.71.

For Benioff, it’s yet another acquisition to expand into new products. In 2014, the company bought RelateIQ, which makes tools to keep track of a salesperson’s interactions with customers, log that information, and offer reminders about when they should get back in contact. The company also spent more than $2 billion on ExactTarget in 2013, a company that specializes in e-mail marketing.

“While valuation multiples related to the transaction seem high to us, we believe the premium is justified,” Yun Kim, an analyst with Brean Capital, said in a note regarding the deal. “The e-commerce market has long remained the missing product offering within its customer relationship management product portfolio.”

Over the last three years, Salesforce has focused on gaining expertise in specific industries to better communicate with its customers, Chief Operating Officer Keith Block said. Demandware, which he said is a leader in the market for cloud-based commerce tools, allows Salesforce to better sell its customer-oriented products to the retail industry. Integrating Demandware’s platform will also allow Salesforce to better personalize its offerings.

“Our customers are telling us, ‘hey, this is a great extension and natural adjacency to our customer success platform,”’ he said. “We’re not just adding a new commerce cloud — we’re also bringing world-class commerce capabilities to the customer success platform.”

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Business

A closing sign hangs above the entrance of the Big Lots at Evergreen and Madison on Monday, July 22, 2024, in Everett, Washington. (Ryan Berry / The Herald)
Big Lots announces it will shutter Everett and Lynnwood stores

The Marysville store will remain open for now. The retailer reported declining sales in the first quarter of the year.

George Montemor poses for a photo in front of his office in Lynnwood, Washington on Tuesday, July 30, 2024.  (Annie Barker / The Herald)
Despite high mortgage rates, Snohomish County home market still competitive

Snohomish County homes priced from $550K to $850K are pulling in multiple offers and selling quickly.

Henry M. Jackson High School’s robotic team, Jack in the Bot, shake hands at the 2024 Indiana Robotics Invitational.(Henry M. Jackson High School)
Mill Creek robotics team — Jack in the Bot — wins big

Henry M. Jackson High School students took first place at the Indiana Robotic Invitational for the second year in a row.

The computer science and robotics and artificial intelligence department faculty includes (left to right) faculty department head Allison Obourn; Dean Carey Schroyer; Ishaani Priyadarshini; ROBAI department head Sirine Maalej and Charlene Lugli. PHOTO: Arutyun Sargsyan / Edmonds College.
Edmonds College to offer 2 new four-year degree programs

The college is accepting applications for bachelor programs in computer science as well as robotics and artificial intelligence.

Everett Mayor Cassie Franklin, Advanced Manufacturing Skills Center executive director Larry Cluphf, Boeing Director of manufacturing and safety Cameron Myers, Edmonds College President Amit Singh, U.S. Rep. Rick Larsen, and Snohomish County Executive Dave Somers participate in a ribbon-cutting ceremony on Tuesday, July 2 celebrating the opening of a new fuselage training lab at Paine Field. Credit: Arutyun Sargsyan / Edmonds College
‘Magic happens’: Paine Field aerospace center dedicates new hands-on lab

Last month, Edmonds College officials cut the ribbon on a new training lab — a section of a 12-ton Boeing 767 tanker.

Gov. Jay Inslee presents CEO Fredrik Hellstrom with the Swedish flag during a grand opening ceremony for Sweden-based Echandia on Tuesday, July 30, 2024, in Marysville, Washington. (Ryan Berry / The Herald)
Swedish battery maker opens first U.S. facility in Marysville

Echandia’s marine battery systems power everything from tug boats to passenger and car ferries.

Helion Energy CEO and co-founder David Kirtley talks to Governor Jay Inslee about Trenta, Helion’s 6th fusion prototype, during a tour of their facility on Tuesday, July 9, 2024 in Everett, Washington. (Olivia Vanni / The Herald)
State grants Everett-based Helion a fusion energy license

The permit allows Helion to use radioactive materials to operate the company’s fusion generator.

People walk past the new J.sweets storefront in Alderwood Mall on Thursday, July 25, 2024, in Lynnwood, Washington. (Olivia Vanni / The Herald)
New Japanese-style sweets shop to open in Lynnwood

J. Sweets, offering traditional Japanese and western style treats opens, could open by early August at the Alderwood mall.

Diane Symms, right, has been the owner and CEO of Lombardi's Italian Restaurants for more than three decades. Now in her 70s, she's slowly turning the reins over to her daughter, Kerri Lonergan-Dreke.Shot on Friday, Feb. 21, 2020 in Everett, Wash. (Andy Bronson / The Herald)
Lombardi’s Italian Restaurant in Mill Creek to close

Lombardi’s Restaurant Group sold the Mill Creek property currently occupied by the restaurant. The Everett and Bellingham locations remain open.

The Safeway store at 4128 Rucker Ave., on Wednesday, Nov. 29, 2023, in Everett, Washington. (Mike Henneke / The Herald)
Kroger and Albertsons plan to sell these 19 Snohomish County grocers

On Tuesday, the grocery chains released a list of stores included in a deal to avoid anti-competition concerns amid a planned merger.

Helion Energy CEO and co-founder David Kirtley talks to Governor Jay Inslee about Trenta, Helion's 6th fusion prototype, during a tour of their facility on Tuesday, July 9, 2024 in Everett, Washington. (Olivia Vanni / The Herald)
Inslee energized from visit to Everett fusion firms

Helion Energy and Zap Energy offered state officials a tour of their plants. Both are on a quest to generate carbon-free electricity from fusion.

Awards honor employers who promote workers with disabilities

Nominations are due July 31 for the awards from the Governor’s Committee on Disability Issues and Employment.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.