Microsoft Chasing More Sales in the Cloud With Salesforce.com

By Paul Ausick Updated Apr 28, 1:40AM EDT · Published May 30, 11:10AM EDT

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The announcement of a strategic partnership between Microsoft Corp. (NASDAQ: MSFT) and Salesforce.com Inc. (NYSE: CRM) after markets closed on Thursday boosted Saleforce.com’s shares in after-hours trading, but investor enthusiasm had waned by Friday morning. Shares opened about 2% higher, but they have since dropped to below Thursday’s closing price.

The announcement is a far cry from the stormy relationship Salesforce CEO Marc Benioff had with former Microsoft CEO Steve Ballmer. Benioff called the Redmond giant a monopolist in 2010 after Microsoft tried to steal away Salesforce customers by offering a rebate of $200 for every user who abandoned Salesforce for Microsoft’s Dynamics CRM Online. The two also sparred the following year at Dell World.

No financial terms of Thursday’s deal were disclosed, but Microsoft CEO Satya Nadella said that his company is excited by the partnership and that he believes it will “help customers thrive in a mobile and cloud-first world.” Microsoft’s position in the mobile and cloud-first worlds is anywhere but near the top, and Nadella is finally admitting it. By partnering with arguably the leader in cloud computing, Microsoft is trying to make up lost ground quickly.

And what’s in it for Salesforce? It gets to add its social and mobile cloud platform, Salesforce1, to the Windows and Windows Phone 8.1 customer bases, and Salesforce will work with Microsoft’s Office 365 on any platform, including the iPad. A Salesforce1 preview is planned for later this year with general availability next year. The new partners did not announce an integration schedule with Office 365.

Both Microsoft and Salesforce lag behind Amazon.com Inc. (NASDAQ: AMZN) in offering both infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS). That market is expected to grow from total sales of around $3.8 billion in 2013 to $14.0 billion by 2017. Adding Salesforce1 to Microsoft’s Azure platform gives the two companies a chance to grab a bigger piece of that pie.

Salesforce shares traded down about 1.7% in the late morning Friday, at $53.49 in a 52-week range of $36.09 to $67.00.

Microsoft traded up 1.2% to $40.81, in a 52-week range of $30.84 to $41.66.

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About the Author Paul Ausick →

Paul Ausick has been writing for a673b.bigscoots-temp.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.

He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.