Salesforce falls 11% after confirming $27.7 billion Slack acquisition and forecasting slower growth
- Salesforce shares dipped as much as 10.7% on Wednesday after the company confirmed its $27.7 billion purchase of Slack and guided for its slowest revenue growth since 2009.
Slackdeal's price tag reflects a 55% premium to where the firm's shares traded before news of the acquisition broke.
Salesforce's third-quarter earnings beat estimates, its guidance for fourth-quarter revenue marked a weakening pace of year-over-year growth.
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The workspace-software company announced on Tuesday afternoon that it would buy Slack for $27.7 billion. News of the deal emerged on November 25 and lifted Slack shares as much as 49% through the following trading sessions.
The acquisition is easily Salesforce's largest and positions the firm to compete with Microsoft in a new software category. The deal's price tag reflects a 55% premium to Slack's stock price before news of the takeover broke.
Investors also balked at a moderating growth forecast for the current quarter. Fourth-quarter revenue guidance calls for Salesforce's slowest quarter of year-over-year growth since 2009. Current-quarter profit guidance similarly surprised to the downside.
Here are the key numbers:
- Revenue: $5.4 billion, versus the $5.3 billion estimate
- Adjusted earnings per share: $1.74, versus the $0.75 estimate
- Q4 revenue: $5.67 billion to $5.68 billion, versus the $5.63 billion estimate
- Q4 EPS: $0.73 to $0.74, versus the $0.86 estimate
"No other major enterprise software company is growing at this rate," CEO
The company said its fourth-quarter income would also be hit by a one-time charge of $80 million to $100 million linked to office shuffling. Mark Hawkins, Salesforce's chief financial officer, told analysts the company decided to consolidate some of its offices and sublease locations.
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Other work-from-home plays have fallen as they've guided for slower growth through the end of 2020. Zoom Video sank as much as 16% on Tuesday after the firm's forecasts for weaker revenue growth led investors to question the sustainability of its year-to-date rally.
With coronavirus vaccines approaching distribution and economists cautiously hoping for a 2021 recovery, some of the market's most popular quarantine stocks are poised to face new pressure.
Salesforce closed at $241.35 per share on Tuesday, up 49% year-to-date. The company has 38 "buy" ratings, three "hold" ratings, and one "sell" rating from analysts.
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