Home / Business / Salesforce.com buys Salesforce.org, and it's the only simple part

Salesforce.com buys Salesforce.org, and it's the only simple part

Salesforce.com Inc. buys Salesforce.org for $ 300 million, with money for the Salesforce Foundation and the low budgets Salesforce.org customers come to Salesforce.

Pretty simple, right? Well, it doesn't get any easier.

In an announcement, Monday afternoon, Salesforce announced

CRM, -0.39%

will acquire an independent entity created to sell Salesforce software at discounted rates to non-profit organizations, schools, and other groups struggling to pay for high quality software. Salesforce.org, a public-sector corporation, will instead become a business unit for Salesforce, while the Salesforce Foundation ̵

1; an ideal dedication to donation to needy groups – will receive money.

While all the talk of non-profit organizations and foundations leads to a warm feeling, it looks like it has the potential to ultimately infirmate either non-profit or Salesforce investors. Basically, either Salesforce's margins will be hit by customers or non-profit customers – everything from American Red Cross, Anti-Defamation League, local Goodwill Industries, Habitat for Humanity to Project Open Hand – can lead to price increases.

Salesforce suggested that price increases are not immediate. The company stated that it plans to extend its current business model by continuing to provide free and highly discounted software to non-profit organizations and training institutes around the world "and promised greater access to Salesforce products.

Salesforce.org gives qualified customers a large discount On Salesforce.com's software as a service, for example, according to its website, Salesforce.org Lightning, Unlimited Edition, which says the ultimate nonprofit customer relationship management software, offers $ 72 a month compared to a standard $ 300 monthly fee, billed annually. [19659002] "It's a really nice deal," said Mark Hawkins, Chief Financial Officer Salesforce, to the few analysts who listened to the company's telephone conference on Monday, saying in 2018 that Salesforce.org had a $ 250 million turnover, but with a low operating margin.

But Salesforce sounds like we did ll increase the profit margin eventually, which probably means counting the bills sent to non-profit organizations and schools.

"This is a company that has a lower operating margin at this stage. But it will also be on a road and convergence over time to our overall long-term operating margin selling price," Hawkins said when an analyst asked it that the agreement seems somewhat diluting for margins.

Salesforce acknowledged that this year's profits will hit, even though Salesforce.org is giving $ 150 million to $ 200 million in additional revenue. This reduced its forecast profit for this year by 20 cents per share and that the GAAP result will take a bigger hit, but could not provide a precise figure. Shares were dipped in late trading after the agreement had been notified.

Hawkins said Salesforce planned to "streamline the areas of operational duplication", which usually means job cuts, but nothing is said about it specifically, and a Salesforce spokeswoman refused to comment on the job cuts record.

Of all the explanations that Salesforce failed to give on Monday, this acquisition was the most confusing cause behind it. Salesforce has long been focused on philanthropy thanks to founder and chief executive Marc Benioff – a great philanthropist on his own. But Benioff was completely absent from a conference call and there was no statement from him in the original message Monday.

Hours after the affair was announced Monday, Benioff's typically active Twitter flow was strangely silent that he swallowed one of his pet projects through his original creation. The company did not say why Benioff was absent from the call.

When an analyst asked about the motivation for the deal, Benioff's CEO, Keith Block, said that the move had been at work for a time and changing structure would eliminate some of the complexity of two different organizations while retaining Salesforce's philanthropic mission.

"You will see the numbers," says Block. "It's definitely worth doing."

The number of Salesforce was offered Monday, but offers little reason to make a deal that could lead to some unhappy people either on Wall Street or in nonprofit auditors. If this is just an efficiency agreement to save some costs, customers need to be prepared for price increases. If Salesforce hopes to compensate for lower operating margins with a little extra revenue, it cannot house investors.

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