Salesforce Weighs Twitter Bid to Spur Growth

Salesforce.com Inc. Chief Executive Marc Benioff built his company into a challenger to Microsoft Corp. and Oracle Corp. in selling software to businesses.

Now he is weighing a bid for Twitter Inc., according to people familiar with the matter, a move that would vault his 17-year-old company into a new realm with very different challenges and risks.

A takeover of Twitter could dovetail with the growth strategy Mr. Benioff has laid out for Salesforce, which would benefit from the huge trove of data generated by Twitter's social network of 313 million monthly users. Increasingly, messaging services like Twitter are being used to communicate directly with companies and with the public about customer service.

But such an acquisition would leave Salesforce with problems Twitter has struggled to manage, including taking down accounts linked to terrorism, curtailing rampant online bullying, simplifying the service to attract a mainstream audience, and competing with social-media rivals like Facebook Inc.

As reported Friday, talks are at an early stage, and might not lead to a deal. Twitter declined to comment.

Salesforce, a pioneer in the business of delivering software as a service over the Internet, offers applications that help salespeople keep track of customer contacts, marketers plan and execute campaigns, and customer-service reps solve problems, among other functions.

Mr. Benioff, a co-founder of the company, is closing in on his longstanding goal of $10 billion in annual revenue and has vowed to double that figure in coming years. He has said that he is looking to artificial intelligence to drive growth over the next decade, and he has spent about $700 million in the past three years to buy companies focused on building software with humanlike abilities to recognize patterns, make decisions, and learn from experience.

Such software requires immense volumes of data—something Twitter has that few other companies can match. Artificial intelligence typically is "trained" on such data sets. The more data available for training, the more accurate the software's decisions can be.

"Twitter is a gold mine of customer insights," said Brandon Purcell, an analyst at Forrester Research. While Salesforce has generated its own trove of data, it still needs access to external sources, he said.

The 52-year-old Mr. Benioff, who is known for his marketing prowess, political activism and philanthropy, is a veteran deal maker. He has engineered more than 70 acquisitions since 2011, according to research firm Dealogic.

Most of those deals were small, but Salesforce recently has been eyeing bigger fish. In June, the company agreed to acquire Demandware Inc., a maker of e-commerce software, for $2.8 billion. The same month, it was outbid in negotiations to buy the professional social network LinkedIn Corp., which Microsoft agreed to acquire for $26.2 billion.

Microsoft has said it hopes to tap LinkedIn's data to bolster its lineup of business software. For instance, LinkedIn data could aid salespeople using Microsoft's Dynamics, which competes directly with Salesforce's sales tools.

Buying Twitter could keep that company's data out of the hands of Microsoft and other Salesforce rivals, including Oracle and International Business Machines Corp. Conversely, if another company were to buy Twitter, Salesforce could lose access to the data.

Twitter investors reacted enthusiastically on Friday to the possibility of a takeover deal. The company's stock rose 21% after a CNBC report that several companies were bidding to buy it. Salesforce's investors were less sanguine, sending its shares down 5.6%.

Salesforce's growth is slowing and investors are concerned that such an acquisition would strain its finances, said Brent Thill, an analyst with UBS Group AG.

"It is worrying investors because the scope of what [Mr. Benioff] wants to take on is bigger than anyone thought he needed to do," Mr. Thill said.

Salesforce already has full access to Twitter's stream of tweets, based on a June 2012 alliance between the two companies. The business-software company has offered the data to help customers take advantage of social conversations about their products to improve sales, marketing and customer service.

Last week, Salesforce unveiled an artificial-intelligence effort, called Einstein, that can analyze tweets posted on Twitter, among other data sources. Salesforce showed how a marketer searching for Twitter users interested in soccer, for instance, could search for tweets containing images of people playing soccer, regardless of whether they included the words "soccer" or "football, and without having to sort through tweets that used the word "balls" other contexts.

Twitter currently is the only social network on which Salesforce is permitted to find images this way, executives said.

LinkedIn on Thursday unveiled updates that gave a glimpse of how it could bolster Microsoft's artificial-intelligence efforts. The company showed how its knowledge of users' connections, locations, and calendars could enable a job seeker to identify a potential employer, make contact, find a mutually suitable meeting time, and choose a mutually convenient location to meet.

Write to Rachael King at [e-mail]

(END) Dow Jones Newswires

September 25, 2016 23:25 ET (03:25 GMT)

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