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Cloud Stocks: Tableau Acquisition Signals Massive Analytics Push for Salesforce

Posted on Friday, Jun 21st 2019

Recent reports suggest that the global data visualization market will become a $7.8 billion industry by 2023, growing at a rate of more than 9% annually. The industry shot into the news recently when Salesforce announced the acquisition of Tableau.

Tableau’s Performance

Tableau had recently reported quarterly revenues of $282.5 million, that fell short of the Street’s forecast of $286.8 million despite a 15% growth over the year. On an adjusted basis, it reported a net income of $2 million, or $0.02 per share, compared to a $5.8 million, or $0.07 per share, for the year ago quarter. The market had forecast a loss of $0.01 per share for the quarter. Tableau had forecast revenues of $1.34-$1.40 billion for the year with an EPS of $1.58-$1.85.

Tableau was founded in 2003 by Stanford alumni and professors Christian Chabot, Chris Stolte, and Pat Hanrahan. Its analytic software is based on two key technological innovations. VizQL, or visual query language, translates drag-and-drop actions into data queries and expresses results through graphics. It simplifies the need to use software code to transform questions into pictures.

Tableau operated a highly capital efficient business model having raised $15 million in funding from three rounds. Its investors included New Enterprise Associates and Meritech Capital Partners. In 2013, it went public and raised $254 million at a valuation of $3 billion. Earlier this month, Salesforce announced plans to acquire Tableau for $15.7 billion in an all-stock deal. The acquisition price was almost a 50% premium over Tableau’s trading price at the time of the announcement. The deal is expected to close by the end of the current year.

Salesforce’s Tableau Acquisition

Salesforce’s acquisition of Tableau will help Salesforce expand its services beyond the core CRM offerings and to improve the data analytics on its existing offerings. Salesforce plans to integrate Tableau’s offerings with its AI-enabled Einstein platform to deliver “a truly unified and powerful view across all of a customer’s data“. Its customers will have the ability to discover actionable insights across their organization. By including Tableau’s capabilities in Customer 360, Salesforce believes that it will be able to provide companies with a complete view of their customers across every touchpoint including sales, service, and marketing.

Most likely, the acquisition is Salesforce’s attempt to compete with Microsoft which has managed to successfully grow Azure, Dynamics, and Power BI to offer a holistic view of customer and operations. Google too continues to build a robust cloud and analytics offering. Google recently acquired Looker, for an estimated $2.6 billion, as part of its analytics acquisition.

As Wedbush analyst Steve Koenig noted,

Salesforce is positioning itself for the future of analytics, which is cloud, self-service, and machine-assisted. The weight of data volume and velocity is starting to shift from premise to cloud, and Salesforce will no doubt work to accelerate.

Salesforce-Tableau is particularly a shot across Microsoft’s bow, extending the CRM rivalry into the heart of the analytics market. The deal adds all the more urgency for public cloud vendors to lead the analytics market into a new era.

This was not the first time that Salesforce looked at Tableau. It is rumored to have evaluated a purchase back in 2016 as well. Overall, it is a strategic acquisition for Salesforce that will no doubt improve its current offerings. Its integrated offerings will make it a tougher playing field for other companies like Oracle, SAP and Microsoft – which don’t have a platform agnostic analytics offering. It will also help Salesforce position itself as more of an enterprise software vendor than a pure-play cloud service provider.

Additionally, Salesforce also acknowledges the importance of a hybrid offering and Tableau’s addition will help it build its presence into that environment. This is not the first hybrid player that Salesforce has acquired in the recent past. Last year, it had acquired MuleSoft, a hybrid API management service provider, for $6.5 billion.

I think this is a bold addition by Salesforce to mark its emphasis on the Analytics segment. Microsoft, Oracle, and SAP sell their BI offerings to the enterprise customer as part of a bundle and have managed to make deep inroads into the market. Tableau has been a fast growing threat to them, and with Salesforce’s might, it becomes a bigger competitor. Tableau also brings with it a healthy portfolio of 86,000 customers.

This segment is a part in the series : Cloud Stocks

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