Morningstar | Blackbaud’s Main Competitor Salesforce.org Acquired by Salesforce.com; Doesn’t Change Our View
On April 16, Salesforce.com announced that it would acquire its nonprofit and education vehicle Salesforce.org for $300 million, a move that raises the competitive threat to wide-moat Blackbaud. Reasons for the maneuver can be attributed to better alignment of resources and go-to-market initiatives, while Salesforce.com creates a new nonprofit and education vertical. The philanthropic nature of the acquisition makes sense given co-CEO Marc Benioff’s long-term support for the nonprofit and education market. However, questions remain whether it’s a good use of investor capital based on the small size of the niche market (whereas investment in the financial services market would’ve made more economic sense), or if over the long term, Salesforce.org clients face heightened price increases as the vertical faces greater possible monetization. We will maintain our $87 fair value estimate for wide-moat Blackbaud and view shares as slightly undervalued after Tuesday’s 4% decline.As we assess Salesforce.org’s main competitor Blackbaud, we remain confident in Blackbaud’s competitive position as the leading software provider in this space. We think the playing field is unlikely to change based on the recent announcement and that the stickiness and intangible assets that Blackbaud possess are unchanged. While the realignment could signify more commitment to the nonprofit and education business by Salesforce, we think they have more lucrative market opportunities elsewhere. We think Salesforce’s product remains positioned at the low end of the market and is more limited relative to Blackbaud’s gold-standard products, which we think will continue to resonate with the mid to top-tier end of this sticky market.
Additionally, customers loathe change and the Salesforce.org acquisition raises the uncertainty of that business. As Salesforce.org has highly discounted prices on its products, and as the low-margin profile of this business is wrapped into Salesforce.com, the possibility of rising long-term prices could disgruntle clients and act as an opportunity for Blackbaud.
Salesforce.Com is engaged in customer relationship management technology. The company's Customer 360 is an integrated platform that unites sales, service, marketing, commerce, integration, analytics and more to give companies a single, shared view of their customers. Through its platform and other developer tools, the company also enables third parties to develop additional functionality and applications, or apps, that run on its platform, which are sold separately from or in conjunction with the company's service offerings. The company's cloud service offerings include sales cloud, service cloud, marketing and commerce cloud, and salesforce platform and other.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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