Salesforce to buy US cloud firm Heroku - Salesforce

Salesforce is to buy US cloud computing firm Heroku for $249 million, further expanding its business to compete with large companies like Cisco.

The deal will see Salesforce hand over $212 million in cash, with $27 million in stock being given to Heroku staff and a further $10 million in cash being offered for unvested Heroku shares, totalling $249 million for the acquisition.

The payment won't benefit Salesforce in the short term, with the company expecting its fourth quarter fiscal 2011 earnings to drop by $0.02 per share initially and then a further drop of $0.12 or $0.13 per share in its fiscal 2012. Revenue from Heroku is not expected to come in until fiscal 2012.

Heroku was established in 2007 in San Francisco, California. It operates a cloud platform that allows the hosting of Ruby applications on its servers. The Ruby programming language is used by many social and mobile firms, including Groupon, Hulu, 37 Signals and Twitter, and Heroku claims that over 105,000 apps run on its cloud service currently.

Salesforce already operates a number of cloud services, mainly in the customer relationship management (CRM) sector, where it competes with Cisco and others. Its competition with Cisco escalated recently when HP ended its CRM partnership with Cisco and signed a deal with Salesforce. Salesforce also announced the launch of a database service next year, which will further step on Cisco's toes.

The acquisition has been approved by the Board of Directors at Heroku and is expected to complete in the fourth quarter of Salesforce's fiscal 2011, which ends of January 31, 2011.