Salesforce.com Signs Definitive Agreement to Acquire Heroku

Heroku is the leading Ruby application platform-as-a-service, powering more than 105,000 next-generation social and mobile cloud applications

SAN FRANCISCO, Dec. 8, 2010 /PRNewswire-FirstCall/ -- Salesforce.com (NYSE: CRM), the enterprise cloud computing (http://www.salesforce.com/cloudcomputing/) company, today announced it has entered into a definitive agreement to acquire Heroku, the fastest growing cloud application platform for writing Ruby-based applications, for approximately $212 million in cash, net of cash acquired. The transaction is expected to be completed in salesforce.com’s fiscal fourth quarter ending Jan. 31, 2011, subject to customary closing conditions.

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“The next era of cloud computing is social, mobile and real-time. I call it Cloud 2,” said Marc Benioff, chairman and CEO, salesforce.com. “Ruby is the language of Cloud 2, and Heroku is the leading Ruby application platform-as-a-service for Cloud 2 that is fueling this growing community. We think this acquisition will uniquely position salesforce.com as the cornerstone for the next generation of app developers.”

“We have a service that developers really love, and salesforce.com has the trust and credibility the most demanding customers expect,” said Byron Sebastian, Heroku CEO. “Together, we will provide the best place to run and deploy Cloud 2 apps. We believe this is the winning combination to bring cloud application platforms into the mainstream of the enterprise.”

Heroku: Leading Ruby Cloud Application Platform

Heroku is the leading Ruby platform-as-a-service, built from the ground up to work in an open environment and take advantage of the Ruby language. Ruby has become the leading development language used to write next-generation apps that are social, collaborative and deliver real-time access to information across mobile devices. Today, Heroku powers more than 105,000 apps, written by an avid following of Ruby developers.

Heroku was founded in 2007 by application developers for application developers, with the goal of making the deployment and management of next-generation cloud apps as easy as developing them. The application platform features a workflow and interface designed to mirror how developers work. Because the platform is a service, there are no virtual machines to manage, no software to install, and no hardware to manage and tune. Developers can focus on writing their code, and Heroku takes care of everything else — from deployment to scaling and quality of service. That focus on the developer experience has translated into a passionate following and rapid growth. Last week alone, developers added 2,600 new apps to the platform.

Ruby: The Development Community for Cloud 2

With a growing community of more than 1 million developers, Ruby has become the leading development language used to write next-generation social and mobile applications. Such apps include Internet and social-media leaders Groupon, Hulu, 37 Signals and Twitter. Heroku — with its flexible and open platform — is geared to that Ruby development community. Heroku serves customers of all sizes, in all industries, from around the world. More than 105,000 web apps run on Heroku’s application platform, ranging from social media apps from cutting-edge companies like FlightCaster, which helps users avoid delayed flights, to established companies such as Best Buy, which created an app to help consumers improve their shopping experience.

With the demand for Cloud 2 apps increasing, new platforms and new languages are required to provide developers with the best experience possible. Salesforce.com recognizes that the leading language for building Cloud 2 apps is Ruby, and the leading cloud platform for Ruby is Heroku. The acquisition of Heroku — the leading Ruby platform for building apps using the leading development language — will help salesforce.com accelerate the shift to the next era of cloud computing, within the enterprise and across the entire industry.

Accelerating the Enterprise Shift to Cloud 2

With Heroku, salesforce.com will gain the leading application platform-as-a-service for developers working in Ruby, the hottest language used today for building next-generation apps. Salesforce.com not only gains a highly talented team and access to the rapidly expanding community of Ruby developers, but also gets technology and intellectual property assets that don’t exist anywhere else. Salesforce.com expects that — together with VMforce, the enterprise Java cloud for the more than 6 million Java developers — Heroku will enable the company to become the unparalleled platform provider for nearly any kind of Cloud 2 application. This will help salesforce.com extend its leadership in the cloud platform market.

Heroku was built with the same multi-tenant philosophy that is the hallmark of salesforce.com’s Force.com platform. Heroku and salesforce.com share the vision of providing an open and portable programming environment that doesn’t require customers to take on the expense or maintenance headaches that come with buying and deploying hardware and software.

Salesforce.com Positioned to Increase Share of Rapidly Growing Cloud Services Market

Salesforce.com anticipates that the acquisition will help it attract and serve a critical mass of developers, customers and ISVs wanting an open, scalable and trusted Cloud 2 platform. The purchase also will enable salesforce.com to take an increased share in the worldwide market for public IT cloud services, which market research firm IDC forecasts will grow 27 percent a year, to $55.5 billion in 2014. The apps that are moving to the cloud increasingly require technologies that support collaboration and mobility. The acquisition of the leading Ruby cloud application platform uniquely positions salesforce.com to capture a greater share of this market opportunity.

Details Regarding the Proposed Heroku Acquisition

Salesforce.com will acquire Heroku for approximately $212 million in cash, net of cash acquired. In addition, as part of the acquisition salesforce.com will grant shares of restricted stock and restricted stock units with an aggregate value of approximately $27 million to Heroku employees and will pay approximately $10 million in cash for unvested Heroku shares. The acquisition has been approved by Heroku’s board of directors and stockholders and is expected to close in the fourth quarter of fiscal 2011, ending Jan. 31, subject to customary closing conditions.

Additional details and information about the terms and conditions of the acquisition will be available in a current report on Form 8-K to be filed by salesforce.com with the Securities and Exchange Commission.

Financial Impact of Proposed Heroku Acquisition

* Q4 FY11: The acquisition is expected to have no impact to salesforce.com’s fiscal fourth quarter revenue. However, the company expects the acquisition to reduce non-GAAP EPS by approximately $0.02 in the quarter ending Jan. 31, 2011.

* FY12: The company currently expects no material revenue contribution from the acquisition during its fiscal 2012. The company currently projects the acquisition to reduce non-GAAP EPS by approximately $0.12 to $0.13 in the year ending Jan. 31, 2012.

The financial impact of the acquisition on a GAAP-basis cannot be estimated until the allocation of the purchase price is made following the closing of the acquisition. Salesforce.com currently expects that the impact of the acquisition will be significantly greater on a GAAP basis than a non-GAAP basis.

About Heroku

Heroku was founded in 2007 by Orion Henry, James Lindenbaum and Adam Wiggins, with the goal of creating a platform-as-a-service that would make deploying, managing and scaling next-generation web applications as easy as writing them. The industry-leading Ruby application platform, Heroku features a workflow and interface that mimics how developers work. Heroku’s multi-tenant architecture means no virtual machines to manage, no software to install, and no complicated platform stacks to manage and tune. Developers can focus on writing their code — and Heroku takes care of everything else. Heroku’s investors include Baseline Ventures, Harrison Metal Capital, Ignition Partners, Redpoint Ventures and Y Combinator. Based in San Francisco, Heroku has about 30 employees.

About Salesforce.com

Salesforce.com is the trusted enterprise cloud computing company. Based on salesforce.com’s real-time, multitenant architecture, the company’s Force.com platform and apps (http://www.salesforce.com/crm) have revolutionized the way companies collaborate and communicate. Salesforce.com’s cloud offerings include:

Salesforce.com offers the fastest path to customer success with cloud computing. As of October 31, 2010, salesforce.com manages customer information for approximately 87,200 customers including Allianz Commercial, Dell, Japan Post, Kaiser Permanente, KONE, and SunTrust Banks.

Any unreleased services or features referenced in this or other press releases or public statements may not be currently available and may not be delivered on time or at all. Customers who purchase salesforce.com applications should make their purchase decisions based upon features that are currently available. Salesforce.com has headquarters in San Francisco, with offices in Europe and Asia, and trades on the New York Stock Exchange under the ticker symbol “CRM.” For more information please visit http://www.salesforce.com, or call 1-800-NO-SOFTWARE.

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