While all tech companies have their eyes on the biggest tech show of the year, Customer Electronics Show (CES) 2018, Salesforce.com Inc. (CRM - Free Report) is silently enhancing its capabilities through acquisitions. Though the company has not made any announcement regarding this, it was the to-be-acquired company — Attic Labs — which revealed this news on its website. However, financial terms of the deal have been kept under wraps.
Attic Labs was founded in 2015 by Aaron Boodman and Rafael Weinstein. According to Crunchbase, the start-up has raised $8.1 million Series A in 2016 from Greylock Partners and Harrison Metal. Attic Labs is known for its Noms tool, an open-source decentralized database, which helps users replicate information as well as edit them across multiple machines and consequently, easily sync the information.
Rationale Behind the Acquisition
Upon completion of the acquisition, Attic Labs’ team will be integrated with Salesforce’s Quip division. Quip is Salesforce’s document-collaboration platform which was acquired in 2016, for a total consideration of $750 million. The division offers a similar platform like Alphabet’s (GOOGL - Free Report) Google Docs, which enables users to share and edit documents.
Noms has much more advanced features than similar kind of tools, including Git. Like Git, Noms also retain all previous versions and facilitate synchronization of all edited versions as per requirements. However, the main features which make it a superior tool are that it stores only structured data, not files or directories, and secondly, it supports very large data sets.
Therefore, we believe the additional features embedded with Noms make it a feasible acquisition for Salesforce. This buyout will enhance Salesforce’s Quip division capabilities and the additional features may attract organizations to opt for this service, instead of Git.
Acquisitions have always been one of Salesforce’s key growth strategies. Although, the company remained almost silent throughout last year on the acquisition front (just one — Sequence), it may repeat the likes of 2016, when it bought 12 companies, this year to boost its capabilities, and grab newer and larger markets.
We believe Salesforce’s continued focus on expanding its business through strategic acquisitions and investments will drive growth over the long run.
Notably, Salesforce has returned 47.5% over the past year, significantly outperforming its industry’s gain of 38%.
Currently, Salesforce carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are Broadcom Limited (AVGO - Free Report) and Mellanox Technologies, Ltd. (MLNX - Free Report) , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Broadcom and Mellanox have expected long-term EPS growth rates of 13.8% and 16%, respectively.
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