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Morningstar | Tableau’s Analytics Appealing for Salesforce; Raising FVE to $194

On June 10, Salesforce announced an agreement to acquire Tableau in an all stock deal that currently values the deal at $15.7 billion excluding cash acquired. Management expect the deal to be completed by the end of Salesforce’s third quarter at the end of October, pending regulatory approval. We think it very unlikely that the deal will fail to be approved by regulators and currently expect it to be completed on schedule. Based on the probability-weighted likelihood of it being completed, we are raising our fair value estimate to $194 from $101 based on our current fair value estimate of $186 for Salesforce shares.

Our pessimistic view on Tableau’s long-term competitive positioning, reflected in our no-moat rating, has always been predicated on the narrow applicability of the solution within the context of a broader computing environment, particularly when juxtaposed with the platforms of the firm’s key competitors. While being recognized as the gold-standard in modern business intelligence, or BI, research suggests that Tableau has been facing pricing pressure in light of bundled offerings from Microsoft and Amazon. Microsoft’s Power BI and Amazon’s Quicksight have been inching closer towards feature parity with Tableau, and these behemoths offer analytics solutions at an appreciably lower cost. As enterprises continue to leverage data for competitive differentiation and operational efficiency, we believe vendors that offer platforms spanning multiple points in the typical workflow are much better positioned. As an illustration, Amazon can provide an enterprise with the infrastructure for their IT ecosystem to run on, platforms that developers can utilize to build code for various analytical models, and with Amazon’s BI offering QuickSight, they’re also providing an analytics and visualization tool capable of performing many of the tasks that Tableau’s products do.

Under the Salesforce umbrella, we think Tableau’s value proposition will be much more compelling, and the combined entity should enjoy a symbiotic relationship that is accretive to its competitive positioning. Though Tableau will continue to operate independently, the firm will have access to Salesforce’s much larger customer base, and Salesforce’s sales and marketing prowess should allow the teams in the field to position the two platforms as a natural cross-sell. While there is substantial work to be done in integrating the go-to-market approaches of the two companies, we believe that the prospect of Tableau being integrated and deployed across Salesforce’s major clouds should ultimately allow the firm to become more embedded within enterprise customer’s workflows.