Microsoft Corporation Backs Out From Slack Acquisition

The tech giant has withdrawn from $8 billion bid for the messaging app after board opposition

Microsoft Corporation (NASDAQ: MSFT) is known for its Windows OS but that is not the only thing it excels in.

Messaging through Skype is another area of expertise and the company now wants to heavily rely on the popular app instead of other acquisitions. The latest report reveals that the corporation has backed out from the Slack acquisition due to board opposition and now it wants to focus on Skype.

On Friday, news broke out that the tech giant is considering acquiring messaging platform, Slack, for $8 billion. Microsoft executive VP of applications and services, Qi Lu, was reported to be behind this idea for the purchase but was not able to convince others. CEO Satya Nadella, founder Bill Gates and many others were not satisfied with the push and so the company had to withdraw from its bid.

Slack is a relatively new app from San Francisco that is quite similar to Microsoft Skype. It offers text and video messaging as well as file sharing features.

The app has achieved tremendous success since its release in 2013, and that is why it gained Microsoft’s attention.

According to Statistic Brain Research Institute, the application has around 2.3 million users with around 700,000 as paying users. This means that the app has generated handsome revenue in several years of operations.

It is widely believed by many that $8 billion was not enough for the acquisition. With increasing revenues, the app has gained great popularity among enterprise users and it is expected to add several new features that will put it in direct competition with Skype.

Hence, it is speculated that even if Microsoft would have offered $8 billion, Slack would not have immediately agreed on the acquisition.

While some believe that Slack is more valuable than $8 billion, others contradict and say that it was not a good idea and that the company would have wasted huge capital. This claim can be backed up by comparing its WhatsApp acquisition. Facebook acquired WhatsApp for about $22 billion in 2014 and paid a value of about $55 per user. Microsoft on the other hand would have paid around 45 times more value per user if they would have acquired it for $8 billion, which means backing out is saving of large capital and hence, a good decision.

Microsoft has already done two purchases in the messaging segment. It acquired Skype in 2011 for $8.5 million and then Yammer in the following year for $1.2 billion.

The latter was, however, a dismal purchase as the acquired technology was later broken down into pieces that were used in Microsoft 365. Though many companies now work on cloud systems and messaging for work, which is what Slack offers, but Microsoft already has tools to offer such services through it Skype and Yammer technology. Hence, the purchase was not a good idea and giving it up would not harm the company either.

Microsoft has also pledged to offer more with Skype to its 74 million users in the near future.

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