More than just Chatter at

Contact: Ben Kolada, Kathleen Reidy

Fresh from closing its $249m acquisition of Ruby developer Heroku, recently announced, and closed, its purchase of Web-conferencing startup Dimdim for $31m. The Lowell, Massachusetts-based target provided a cloud-based open source Web-conferencing service for businesses, and with this deal now claims 60,000 Chatter users, though with its ‘freemium’ model we suspect that only a fraction of these are paying customers. paid $31m in cash for Dimdim, which had raised a total of $8.4m from venture investors Draper Richards, Index Ventures and Nexus Venture Partners. Per’s conference call, Dimdim has 75 employees spread throughout its offices in Lowell and Hyderabad, India. Although the target’s annual revenue wasn’t disclosed, we estimate that it closed 2010 with about $2m in revenue.

Like’s previous collaboration pickup – GroupSwim, in December 2009 – Dimdim’s services will be shut down, and its capabilities will be rolled into Chatter,’s social collaboration software service that first launched in 2009. As my colleague Kathleen Reidy notes (click here to see her full report on the acquisition), as evidenced by the almost immediate shutdown of the Dimdim service, isn’t interested in the pure Web-conferencing market. will honor contracts with Dimdim’s existing customers, though these will not be eligible for renewal, and it has terminated Dimdim’s free service. Dimdim also had an open source distribution and while this is still available, it won’t see any further updates. Instead, Dimdim will provide features to Chatter, which is also incorporating semantic analysis technology from GroupSwim.

M&A ‘chatter’ around

Contact: Brenon Daly, China Martens

Official word from is that its recently announced Chatter product was developed in-house. And that would certainly be in keeping with the company’s history of staying away from M&A. Since it opened its doors a decade ago, has done just five tiny deals. The vendor certainly has one of the lowest ratios of total M&A spending (probably around $70m) to market capitalization ($7.7bn) of any of the big software vendors.

Nonetheless, there was some chatter (if you’ll pardon the pun) that may have acquired some technology from a small startup to shore up the recommendation engine portion of Chatter, a collaboration/social networking offering that’s slated to come out next year. The M&A speculation centered on a startup that perhaps provided some natural-language search capability. We would note that a small shopping trip by – if, indeed, there was one – to get some social networking/natural-language technology wouldn’t be without precedent. Rival CRM vendor RightNow tucked in HiveLive, which had just 25 customers, in a $6m deal last summer.

Whether or not went shopping for part of Chatter, it’s worth pointing out that the firm has used M&A as a way to go after Microsoft’s SharePoint in the past. In early 2007, the company picked up Koral, an early-stage content management startup that had effectively been incubating. (And on a smaller scale, several months after that, it quietly acquired a tiny social networking startup, CrispyNews.)

However, we’re guessing that those purchases, particularly the Koral deal, haven’t generated the returns that might have hoped. The vendor originally said that Salesforce Content – an add-on, extra-cost module based partly on Koral – could do to SharePoint (among other document management offerings) what did to Siebel in CRM. That hasn’t come close to happening. In fact, just announced that Content will be available free of charge to all customers.’s service play

Contact: Brenon Daly

Heading into Thursday‘s luncheon hosted by, there was a fair amount of speculation that the software-as-a-service (SaaS) stalwart would be using the event to announce a new acquisition. The company employed the same setup to disclose its purchase of tiny content management startup Koral in April 2007. The rumors turned out to be off the mark a bit, as the luncheon instead focused on’s rollout of a new customer service offering. There is a link to M&A, however. The offering unveiled, Service Cloud, got a substantial boost when the company picked up privately held InStranet last August.

InStranet stands as’s largest acquisition in its 10-year history, but one insider told us the deal almost didn’t happen. paid $31.5m for InStranet, which we understand was about twice the amount of sales the French company booked in the year leading up to the transaction. But wasn’t the first bidder for InStranet, according to one source. SAP had moved pretty far along during M&A discussions with InStranet before entered the picture. Marc Benioff’s buyers buttoned up the purchase in just three months, the source added.

And then there were five:’s acquisition history

Announced Target Deal value Target description
August 2008 InStranet $31.5m Customer service automation
October 2007 CrispyNews Not disclosed Community news, website development
April 2007 Koral $7m* Web content management
August 2006 Kieden Not disclosed Search engine marketing management
April 2006 Sendia $15m Wireless application developer

Source: The 451 M&A KnowledgeBase *451 Group estimate for sale?

Ever since Barack Obama won the US presidential election two weeks ago, Silicon Valley has started its own little parlor game about the incoming administration. (And make no mistake, the Valley is one of the most insular places on the planet, which makes these guessing games fun for those in certain zip codes.)

The specific gossip? Who will fill the cabinet-level position of CTO that Obama promised to create while campaigning. Early conjecture centered on Google’s Eric Schmidt, who recently replied, ‘Not it.’ Over the weekend, The Wall Street Journal reported that Oracle’s top lieutenant Chuck Phillips may be in the mix. (Phillips already did a stint of public service in the US Marines before diving into the public markets.)

We cite the rumor-mongering about Oracle’s president because we want to add our own bit of wild speculation: If Phillips leaves Oracle, a deal for will move closer. We understand from a number of sources that Phillips has effectively vetoed a purchase of the on-demand CRM vendor, even though CEO Larry Ellison has indicated several times that he’d like to pick up the company, if just to jump-start Oracle’s own software-as-a-service (SaaS) offering. (An acquisition would also help Oracle widen the gap with rival SAP, which has stumbled with its own SaaS offering for midmarket companies, which it calls Business ByDesign.)

Of course, we still like Google as a buyer for That’s even more the case since the company has seen its stock price cut in half over the past year. (It sports a current market capitalization of $3.1bn, compared to projected sales in the current fiscal year of $1bn.) Wall Street will get an update of’s business on Thursday, when it reports fiscal third-quarter results. Sales for the quarter are expected to come in at about $275m.

Big, happy family or favorite child?

For an executive who learned the ropes from Larry Ellison, Marc Benioff has adopted a very ‘un-Oracle-like’ approach to M&A. Since the company he founded,, went public in mid-2004, Benioff has inked just five deals. The total shopping bill: less than $100m. Oracle, on the other hand, hardly touches a deal worth less than $100m. In the same four-year period that has been public, Oracle has closed 45 deals with an announced value of more than $30bn.

Of course, the two companies are in very different stages of their lives, which goes a long way toward shaping their M&A activity. While Ellison and Oracle look to consolidate huge blocks of the software landscape, Benioff and target tiny technology purchases that allow them to extend their on-demand offering to new markets. We saw that with’s purchase last year of content management startup Koral, which had just nine employees. And on Wednesday, announced its largest deal so far, spending $31m on call center software vendor InStranet.

But we would add another – perhaps less obvious – reason for the rather shallow deal flow at In many ways, the company is caught between shopping and partnering. In an effort to get a richer valuation, has pushed and AppExchange as a way to be viewed as a platform company, rather than merely an applications vendor. (That effort got a big boost this week from Dell, which said it will be developing applications on the platform over the next three years.)

However, the very success of these efforts helps to explain why has to keep its checkbook in its pocket when shopping. It can either focus on building out its platform or it can focus on deal-making – it can’t do both. By design, platforms are broad, open and inclusive, while M&A necessarily involves selecting one above all others. Benioff can’t pick a favorite child and expect to have a big, happy family.

To illustrate the dilemma, consider the situation concerning sales compensation, a line of business that’s a logical extension of’s core CRM product and one the company could easily buy its way into. Indeed, there are already more than a half-dozen companies offering their sales compensation products on AppExchange. But imagine if decided to buy one of the vendors, say Xactly Corp. Obviously, that purchase would alienate AppExchange rivals like Centive and Callidus Software, which would probably pull their offerings from AppExchange the day the deal was announced. may well make up that immediate loss of revenue down the line. But as indicated by Wall Street’s brutal reaction Thursday to the company’s second-quarter report, it’s best not to tamper with the top line. an unwilling buyer

Announced Target Deal value Target description
Aug. 2008 InStranet $31.5m Customer service automation
Oct. 2007 CrispyNews Not disclosed Community news, website development
April 2007 Koral $7m* Web content management
Aug. 2006 Kieden Not disclosed Search engine marketing management
April 2006 Sendia $15m Wireless application developer

*451 Group estimate, Source: The 451 M&A KnowledgeBase

Come on, Google, buy already

Companies looking to get into new markets typically run the clichéd ‘buy, build or partner’ calculus on how to get the highest return on the lowest investment. Invariably, the answer is ‘yes’ to all of the options, as significant strategic moves require broad efforts to take the company in new directions.

Consider the case of Google and its still-emerging Apps business. (Like so much at the search engine company, there seems to be a ‘beta’ tag hanging on this division.) It has inked three deals for both technology and a sales channel, unleashed hundreds of engineers on the would-be ‘Office killer’ and, just recently, put together a distribution deal with

And yet, Apps still isn’t where Google needs it to be. Even more of a concern is that, in our opinion, the moves aren’t even enough to get Google Apps in a position to begin to challenge Microsoft Office. Google needs something more. In the end, a successful partnership isn’t simply about access. It’s about efficacy. In order for Google to control the distribution channel, it has to control Read full report.