Global cloud computing company (NYSE:CRM) has decided to acquire RelateIQ, a provider of an analytics-based customer relationship management (CRM) platform, for $350 million in stock.

Although the deal size is relatively small --considering that has a nearly 10-year history of increasingly expensive acquistions, including the acquisition of ExactTarget for $2.5 billion in 2013-- it confirms that is still embracing a growth strategy based on acquiring competitors and potential rivals. is still the leader in the CRM industry, despite fierce competition from big tech players such as Microsoft (NASDAQ:MSFT) and Oracle. Why is acquiring RelateIQ?


Source: RelateIQ

The world's first Relationship Intelligence platform
RelateIQ pitches itself as the builder of the world's first relationship intelligence platform, which is a data-driven alternative to Salesforce and other CRM platforms.

The company's platform connects with the salesperson's inbox and calendar to capture professional touchpoints automatically. It also captures customer interactions automatically as the salesperson works, eliminating the need for keeping records or writing memos. It also merges contacts across a particular team, and searches for new data on a particular customer from LinkedIn, Twitter, and other social networks. 

All the information capture by RelateIQ can be seen in a mobile-friendly design. More important, users can see teammates' interactions, which allows a particular team to offer a unified customer experience.

The deal
In a regulatory filing, said it will pay $350 million for RelatedIQ's shares and another $40 million for RelatedIQ's cash balance. The acquisition price represents at least a 42% premium to the valuation that RelatedIQ obtained in its last venture fundraising, where investors valued the start-up at $245 million. To pay for this deal, expects to issue between 6.2 million and 7.6 million shares. After the acquisition process is completed, RelateIQ will become a subsidiary.

If you can't beat them, buy them
The latest acquisition of is consistent with the company's growth strategy, which is based on acquiring either key competitors or start-ups that could become rivals in the mid-term.

RelatedIQ belongs to the second category. The start-up's revenue will likely cause no immediate effect on's huge top line. Note that in the most recent quarter,'s revenue came in at $1.23 billion, up 37% year-to-year.

However, by acquiring RelatedIQ, is effectively swallowing up a potential mid-term challenger. More important, RelatedIQ's platform appears to be innovative and scalable enough to eventually become a game changer in the CRM world. By integrating RelatedIQ to its portfolio of cloud-based services, could bring the concept of relationship intelligence to its more than 100,000 customers, and make RelatedIQ very popular in the industry in a few months. 

Beware of Microsoft
Note that's growth strategy is being challenged by fierce competitors, from Microsoft and Oracle, to start-ups. Microsoft is particularly interested in the CRM world, as evidenced by the company's focus on Microsoft Dynamics, a line of easy-to-use business solutions.

Microsoft is using an aggressive pricing strategy to capture market share, as it promises up to 48% savings over The product suite includes Microsoft Social Listening, a software that allows customers to track social sentiment in real time. 

The combination of aggressive pricing, an easy-to-use interface, social features, and a strong brand, has helped Microsoft to quickly win important customers, such as Delta Airlines and ING Bank. More recently, Microsoft announced a new service compliant with FedRAMP  (Federal Risk and Authorization Management Program) security standards, targeting U.S. government agencies. The focus on security could also bring new opportunities in the financial sector. 

Final Foolish takeaway is paying $350 million for promising start-up RelateIQ, as a way of pre-empting a future rival. The deal will allow to integrate innovative relationship intelligence services to its wide portfolo of CRM services. The move is consistent with's growth strategy based on key acquisitions.

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Victoria Zhang has no position in any stocks mentioned. The Motley Fool recommends The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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