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SUCK LESS “Salesforce.com buys Instranet to make call center suck less” Source – Valleywag 9/2008 2

INFR 511 -TEAM 2 PAT BARRY, MARK FORTUNE, PATRICIA MATCHETT, DAVID TINKER PPMD MISST CONSULTING FIRM SPECIALIZING IN SOFTWARE MERGERS AND ACQUISITIONS Recommendation on the Purchase of Salesforce.com 3

 COMPANY OVERVIEW  MISSION AND VALUES  SALESFORCE.COM SOFTWARE  CORPORATE PURCHASES  FINANCIAL ISSUES  WEAKNESSES AND THREATS  RECOMMENDATION What We’ll Discuss 4

Salesforce.com Overview Salesforce.com Invented SaaS and PaaS categories HQ in San Francisco, with offices in Asia, Europe, Australia and North America Went Public June 2004 on NYSE Added to S&P 500 September 2008 Revenue $748.7 million Operating Income $20.3 million Net Income $18.5 million 2,600 Employees 5

Mission and Values Google Mission - “To organize the world’s information and make it universally accessible and useful.” ( 2007 Google Annual Report ) Philosophy 1. Focus on the user and all else will follow. 2. It's best to do one thing really, really well. 3. Great just isn't good enough. Salesforce.com “Our mission is to help our customers solve complex business problems, including problems of scale, through more effective use of Salesforce.com ™ and the Force.com ™ platform.” Provide business automation enhancements to maximize our clients efficiency with the use of their business software. 6

Video Demo 7

Purchases Google Has purchased 18 companies since 1/07 totaling more than $4.0 billion Includes software to support AdWords, Google Mobile, Google Chrome, Google Docs, Blogger, Google Maps, and Gmail. Salesforce.com has purchased Sendia (April 2006) for $15 million in cash– now Force.com Mobile Kieden (August 2006) – now Salesforce for Google AdWords Kenlet(January 2007) – Original product CrispyNews used at Salesforce IdeaExchange and Dell IdeaStorm. Now relaunched as Salesforce Ideas. Koral (March 2007) – now Salesforce Content Instranet (August 2008) – for $31.5 million now rebranded to Salesforce Knowledge Base Source: Wikipedia 8

Cost to Purchase Salesforce.com It will cost $6 -$10 billion to purchase Salesforce.com based on stock value and assets. 9

Salesforce.com Revenue of $748.7 MM 47,700 Customers 1,000,000+ Subscribers Market share leader of SaaS and PaaS Has had established relationship with Google since 2003 (source Gartner.com) 10

Key Financial Statistics 11 GOOGLESALESFORCEVARIANCE NET PROFIT MARGIN25.33%4.27%-21.06% OPERATING MARGIN30.64%5.25%-25.39% EBITD MARGIN36.47%8.29%-28.18% RETURN ON AVERAGE ASSETS19.19%3.97%-15.22% RETURN ON AVERAGE EQUITY21.16%7.29%-13.87% CURRENT RATIO8.5:11.2:1-7.3:1 PE RATIO EARNINGS PER SHARE PRICE PER SHARE SOURCE: finance.google.com

Financials Google (GOOG) and Salesforce.com (CRM) Overlay with Dow Jones Index – 9/12/08 Source: finance.google.com 12 Stock Price

W&T from SWOT Analysis of Salesforce.com Weaknesses Poor brand recognition reduces ability to market product Lack of capital to put towards R&D Heavy reliance on third-party relationships and outsourcing for web-hosting facilities, hardware, and software. Still evolving business model creates uncertain future. Brief history of the company means less reliance on operating results. Threats Loss of key personnel to competitors or other technological companies Sarbanes-Oxley and other governmental privacy laws. Potential security breaches similar to 2007 results in loss of trust from clients. Competitive products from companies with greater brand name awareness such as IBM, Microsoft, Oracle. 13

Reasons to Not Purchase Salesforce.com Salesforce.com doesn’t fit into Google’s philosophy. Estimated $6 to $10 billion investment. Payback period will take decades. ROI is low – only 7.29%. Well established partnership that currently creates revenue. Weak brand recognition outside of technology circles. Salesforce.com is dependent upon third party hardware and infrastructure. Subscriber security breach. Companies co-exist in geographical markets. Only has 9% of CRM market share by revenue. 14

IT IS OUR RECOMMENDATION TO NOT PURCHASE SALESFORCE.COM AT THIS TIME. RECOMMENDATION 15