Why Salesforce.com Is Buying RelateIQ

Learn why cloud giant Salesforce.com is acquiring RelateIQ, a startup pitching itself as the builder of the world's first Relationship Intelligence Platform.

Jul 14, 2014 at 6:00PM

Global cloud computing company Salesforce.com (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 Salesforce.com has a nearly 10-year history of increasingly expensive acquistions, including the acquisition of ExactTarget for $2.5 billion in 2013-- it confirms that Salesforce.com is still embracing a growth strategy based on acquiring competitors and potential rivals. Salesforce.com is still the leader in the CRM industry, despite fierce competition from big tech players such as Microsoft (NASDAQ:MSFT) and Oracle. Why is Salesforce.com 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, Salesforce.com 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, Salesforce.com expects to issue between 6.2 million and 7.6 million shares. After the acquisition process is completed, RelateIQ will become a Salesforce.com subsidiary.

If you can't beat them, buy them
The latest acquisition of Salesforce.com 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 Salesforce.com's huge top line. Note that in the most recent quarter, Salesforce.com's revenue came in at $1.23 billion, up 37% year-to-year.

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

Warren Buffett: This new technology is a "real threat"
At the recent Berkshire Hathaway annual meeting, Warren Buffett admitted this emerging technology is threatening his biggest cash-cow. While Buffett shakes in his billionaire-boots, only a few investors are embracing this new market which experts say will be worth over $2 trillion. Find out how you can cash in on this technology before the crowd catches on, by jumping onto one company that could get you the biggest piece of the action. Click here to access a FREE investor alert on the company we're calling the "brains behind" the technology.


Victoria Zhang has no position in any stocks mentioned. The Motley Fool recommends Salesforce.com. 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers