Mulesoft Inc (NYSE:MULE) isn’t exactly a household name. That may be why investors more or less shrugged their shoulders when they heard last month that salesforce.com, inc. (NYSE:CRM). And, for owners of Salesforce stock that know the details of the deal and what Mulesoft is, the $6.5 billion offer for the outfit is a bit of a jaw-dropper.
Mulesoft only drove $296 million in revenue last year. A closer look at what Mulesoft is and does, however, not only makes sense of the deal, it sets the stage for an impressive amount of synergistic growth. In fact, we’ve already seen an early glimpse of how Salesforce.com intends to leverage its newly-acquired tools.
Warning: Unless you’re well versed in app creation and cloud computing, you may not understand all the detailed nuances you’re about to read. The good news is, you don’t need to fully understand what Mulesoft does to appreciate how it could ultimately boost the value of Salesforce stock.
In simplest terms, Mulesoft provides ways of connecting two otherwise unlike computer programs, or apps. Using its Anypont platform, older software that wasn’t designed to be used on modern operating systems can be utilized. Two unconnected interfaces can be combined into one, creating powerful tools for their users.
Electronics manufacturer Siemens offers a great example of how Mulesoft can make old, unusable data usable again. Still using an old mainframe system from International Business Machines Corporation (NYSE:IBM), a few years ago Siemens tapped Mulesoft to develop a way of allowing that older, ‘legacy’ data to be accessed via mobile apps.
The end result was a 50% improvement in its speed of project delivery. Siemens is hardly the only company Mulesoft has helped enter the modern era of computing though.
General Electric Company (NYSE:GE), Wells Fargo & Co (NYSE:WFC) and TiVo Corp (NASDAQ:TIVO) are just a handful of other companies that have asked Mulesoft to provide a way of making all the information stored by a company software accessible to all, and accessible in a way that matters.
From Good to Better to ‘Whoa’
The aspect of the pairing that’s largely been lost is that Mulesoft has already built a platform that integrates salesforce.com’s interface with a client company’s data cache that would otherwise be inaccessible. There’s not exactly a learning curve here.
It’s more than just the union of two companies that can enhance existing synergies, however. The move will certainly rock the boat of current salesforce.com clients that may soon find themselves in competition with the combined organization.
One of them is Microsoft Corporation (NASDAQ:MSFT).
Yes, Mulesoft was already offering integrations of Microsoft’s CRM (customer relationship management) solutions with information that makes those sales people even more powerful. And, salesforce had also devised a way for it and users Microsoft Office 365 products to easily combine the power of the two platforms into one simplified tool.
It’s not clear now exactly where the Mulesoft/Salesforce.com union leaves Microsoft… friend or foe. Maybe it’s a little of both. One thing is clear though. That is, Mulesoft was already doing things Microsoft couldn’t quite mimic. Now the value-add case for Salesforce is even stronger.
Another outfit that may want to look over its shoulder is Adobe Systems Incorporated (NASDAQ:ADBE).
Yes, this is the same Adobe perhaps best known for its role in the development of the PDF (portable document format), which made it easy to share documents online. It’s also the name behind graphical editor Photoshop.
Adobe is hardly just photo editors and web-delivered documents though. It’s also neck-deep into customer experiences. Called the Digital Experience Suite, the Adobe platform can track each and every customer interaction a client company has with a particular consumer, tailor-making a way of better marketing to them.
The tool will even go as far as to decide to show that customer a different version of a company website than the one a different customer just down the block might see.
With Mulesoft now being brought in-house though, it’s difficult to imagine Salesforce.com not being able to unlock any information a client company wants unlocked the same way Adobe’s Digital Experience Suite can.
Bottom Line for Salesforce Stock
It’s difficult to pinpoint exactly how big the opportunity is, as many companies still don’t know exactly what data they’re not unlocking but probably should be. But, IT-research firm Gartner reckoned that in 2016 (really before cloud computing became the norm) the market was worth $10 billion per year.
By 2020, it could be worth roughly $15 billion, though even that outlook may not fully account for the integrations that don’t cleanly fall into the category if iPaas (or integration platform as a service).
Whatever the case, it is clear that what Mulesoft does is necessary, and therefore marketable, in a big way. Even without knowing exactly how big of a deal it is, current and prospective owners of salesforce stock can take comfort in knowing that while the $6.5 billion Salesforce.com spent on Mulesoft was money well spent.
In other words, COO Keith Block wasn’t just blowing smoke when he said last month:
“Being able to coordinate and unlock and integrate all this data is so important. Over time all of these organizations’ legacy systems will be moving to the cloud. But it has taken years to build up these systems and I don’t think we can underestimate how much legacy is still out there.”
He said a mouthful.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.