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Publication title: "Salesforce's Buddy Buy Shows Startup Demand"
The author highlights the growing trend among software specialists to acquire startups as a means of increasing their exposure to an ever-expanding social-media presence. Since 2009, the valuation of these takeovers has swelled to $17.4 billion from $715.5 million. San Francisco-based Salesforce.com (CRM - 128.93) is one such cloud computing concern that has displayed a ferocious appetite for startups over the past six years.
CRM's most recent purchase of Buddy Media -- a five-year old company that quantitatively analyzes social media marketing campaigns -- brings the company's acquisition tally to 20. To put in perspective the increasing demand for startups, CRM laid out $745 million for Buddy Media, more than double what it paid for its 2011 purchase of social-media monitor Radian6.
"M&A is the new R&D," says Sean Whiteley, a senior vice president at Salesforce, who has worked on several of its acquisitions. "The startups are small, they are fast-moving, they are focused on one problem, and they're going to solve that problem very well." This allows the company tremendous potential in a tough market, as the already-developed, in-demand software could quickly push CRM into a leading position in the industry.
On the technical front, CRM had an impressive start to 2012, following a path laid out by its 20-day moving average. After tagging an all-time high of $164.75 on April 19, the stock pulled back to its 200-day moving average -- a trendline that has alternately served as support and resistance for the security.
Despite CRM's 27.2% year-to-date gain, investors have been pointing a bearish finger toward the outperforming equity. During the past 10 sessions, traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 1.84 puts for every call. This ratio ranks in the 85th percentile of its annual range, suggesting that bearish bets have been scooped up over bullish at an accelerated clip in recent weeks.
Even more telling of the Street's skeptical stance is the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.34, which ranks higher than 92% of other such annual readings. In other words, near-term traders have been more put-heavy only 8% of the time during the past year.
This black cloud has drifted outside of the options arena, as well, where short sellers have smacked the stock with their bearish stamp of disapproval. In fact, short interest currently accounts for an eye-catching 9.5% of the equity's available float.
From a contrarian perspective, the overriding negativity surrounding the stock could translate into buying power in the near term. Should CRM resume its quest for new highs, a capitulation by some of the weaker bearish hands could assist the security in its journey northward.