Citigroup On Salesforce Rumors: 'Chasing The Hottest Stock At The Dance?'

In a report published Thursday, Citigroup analyst Walter H. Pritchard offered a closer look at implications of a potential salesforce.com, inc. (NYSE: CRM) acquisition, noting that he doesn't "have a call" on the credibility of media reports, but nevertheless dove into the possible financial impact of such a transaction.

According to Pritchard, any such deal would be most impactful to Microsoft Corporation (NASDAQ: MSFT) if it were to acquire the company, as it would become the No. 1 enterprise cloud company and add a second leading SaaS franchise to O365. The analyst added that Microsoft's position with developers is "tenuous," given a lack of relevance in mobile and competition on the server-side for native .NET.

"Such an acquisition would make Microsoft newly relevant to developers, in our view, given the importance of CRM in the front-end application ecosystem," Priitchard wrote while adding that "if Salesforce is in play, Microsoft could be the most likely suitor."

However, the analyst cautioned that Microsoft could see negative reaction to its stock price as an acquisition would potentially signal the company is in a more tenuous position in commercial business than investors currently think.

Related Link: Every Reason Oracle & Microsoft Would (Or Would Not) Acquire Salesforce

Front-End Still Strategic To Oracle

Pritchard said that Oracle Corporation (NYSE: ORCL) had been "doubling down" on HCM, financials and other areas of the applications market and may have "given up" competing frontally against Salesforce.

With that said, the analyst stated that an Oracle acquisition of Salesforce could make the company an "equal challenger" to SAP SE (NYSE: SAP) in enterprise apps and offers Oracle "instant credibility" in cloud apps.

However, the analyst sees such a deal as "less likely" as it would potentially be "significantly" dilutive to Oracle without major cost cuts and, if announced, shares of Oracle are likely to see a "significantly negative" reaction.