Slack + Salesforce Emergency Pod with Packy McCormick of Not Boring

Episode Summary

Executive Summary: The episode analyzes Salesforce’s surprise $27.7B acquisition of Slack as both a defensive move against Microsoft Teams and a strategic bet on a best-of-breed enterprise software bundle. The hosts and Packy McCormick debate whether Slack was undervalued, why its public-market narrative lagged its fundamentals, how Slack Connect could unlock Salesforce distribution, and whether this deal accelerates or harms the future of collaborative software.

Main Topics: Slack’s acquisition and valuation (Priority: 5/5): The conversation opens on the deal terms, including the $27.7B price, premium to Slack’s trading price, and the sense that Slack finally got a public-market rerating after a long period of underappreciation. Microsoft Teams as the dominant narrative (Priority: 5/5): A central theme is that Microsoft’s aggressive comparison of Teams to Slack distorted the market’s view of Slack, even though the two products serve different primary use cases and Teams benefited from Microsoft’s distribution power. Slack’s product strengths and Slack Connect (Priority: 4/5): The group argues that Slack remains a strong SaaS business with excellent metrics, especially Slack Connect, which expands Slack from internal communication into cross-company collaboration and could be pivotal inside Salesforce. Why Salesforce bought Slack (Priority: 5/5): The acquisition is framed as a distribution play and a best-of-breed consolidation move: Salesforce gains a modern communication layer that can be pushed into large enterprises, while Slack gains Salesforce’s sales force and credibility. Competitive future: best-of-breed vs bundled suites (Priority: 4/5): The episode explores whether this deal marks the start of an anti-Microsoft alliance built around Salesforce, or whether integrated suites will still win over enterprise buyers who prefer one throat to choke. Bear case: collaboration moving into apps (Priority: 4/5): The hosts discuss the risk that collaboration is increasingly embedded directly into tools like Figma, Notion, and others, making Slack a fallback layer rather than the primary work hub. Potential acquirers and strategic alternatives (Priority: 3/5): Google and Zoom are discussed as alternative buyers; Google is seen as a particularly natural fit given G Suite, while Zoom is viewed as focused on video and likely less interested in broad enterprise bundling.

Key Arguments: Slack’s stock underperformed largely because Microsoft chose to directly and repeatedly frame Teams as a Slack competitor, even though Teams is closer to a video/Office launcher than a true Slack substitute. Slack’s underlying business remained strong: high growth, strong gross margins, rising free cash flow, and strong retention/customer adoption metrics. The acquisition is best understood as a distribution deal, not a deep product merger; Salesforce can push Slack into much larger enterprises than Slack could reach alone. Slack Connect is strategically important because it gets external counterparties into Slack, creating a try-before-you-buy pathway and making Slack more like an industry communication layer. The deal may represent the beginning of a broader rebundling of enterprise software, but not in the same form as the old Microsoft bundle; procurement, spend management, and integrated best-of-breed stacks are evolving. A key bear case is that collaboration is migrating into the apps themselves, which could make Slack a secondary or emergency communication layer instead of the central hub. Salesforce was uniquely positioned to buy Slack because it had strong distribution and, unlike Microsoft, did not face the same level of antitrust scrutiny. Slack may have sold because the combination of a large premium, ongoing Microsoft pressure, and the opportunity to reach more customers through Salesforce made the outcome attractive despite Slack’s improving fundamentals.

Data Points: Acquisition price: $27.7 billion - Total purchase price Salesforce is paying for Slack Share price: $45.86 per share - Approximate cash-and-stock value implied by the deal Premium to pre-leak price: 55% - Premium to Slack’s price before the acquisition was leaked Premium to recent crash price: 85% - Premium to Slack’s post-September-earnings stock low Slack revenue in quarter: $235 million - Latest quarter discussed during the episode Slack annualized run rate: ~$1 billion - Packy characterizes Slack as a billion-dollar run-rate business Gross margin: 86% - Slack’s gross margin highlighted as a top-tier SaaS metric Free cash flow: $36 million - Slack’s free cash flow in the quarter discussed Prior free cash flow: $10 million - Previous quarter figure used for comparison Year-over-year growth: 39% - Slack’s most recent quarterly revenue growth rate discussed Prior year-over-year growth: 49% - Slack’s prior quarter growth rate Slack Connect endpoints growth: 380,000 to 520,000 - Slack Connect endpoints increased in the quarter Slack Connect endpoint growth rate: 240% year over year - Growth metric used to show strategic momentum Paid customers growth: 140% year over year - A reported customer adoption metric Microsoft Teams users: ~100 million+ - Estimated scale discussed as roughly 10x Slack Slack users: ~12 million - Scale comparison used in the Microsoft Teams debate Next 12 months revenue multiple: 27-28x - Approximate valuation multiple implied by the deal

Pivotal Quotes: "The combination will create the operating system for the new way to work, uniquely enabling companies to grow and succeed in an all-digital world." — Salesforce press release: Quoted to frame the strategic rationale for the acquisition "The biggest number one thing that has kept Slack beaten down is just the threat of Microsoft Teams." — Packy McCormick: Packy explains why the market chronically undervalued Slack "Slack is really, once every piece of what a business does has a Figma-like software that has collaboration embedded, then Slack becomes this kind of like back-up." — Packy McCormick: Bear case for Slack as collaboration migrates into apps

Implications: The deal validates Slack’s product and may accelerate enterprise adoption through Salesforce, but it also signals a broader shift toward bundled best-of-breed software and away from standalone communication layers. Competition with Microsoft and embedded collaboration tools remains the key risk.