Salesforce announced Monday that they’re buying Tableau for $15.7 billion. That news “rocked” the BI world. Tableau’s stock increased 33% with the news.
Tableau's stock has always been a fun one to watch. Despite its volatility, Tableau grew 220% higher since it went public back in May of 2013. For comparison, the S&P 500 grew 73% during that same time.
Data provided by Yahoo Finance
The success of Tableau’s stock is a harsh reminder that I don’t know growth stocks very well. For years, Tableau never made a profit. I never bought the stock because of that reason (as well as my preference for index funds).
Back when I did buy individual stocks, I followed the “value” approach. I focused on low P/E ratios and low P/B ratios, as well as those that paid dividends. That’s another way of saying I only focused on companies that gave me as much earnings as possible for as low of a price as possible. That strategy works well for more established companies or less prestigious brands, but just doesn’t seem to work for growth tech stocks like Tableau.
A former boss of mine once explained to me why tech companies (and their stocks) seem to operate on a different level. He had a lot more experience in tech companies and he told me that many tech companies are not focused on making a profit from their product. They are focused on improving the product and building an organization that could support it. The intent was to do this until another company would buy their company and would then find a better way to monetize it.
Another way to put that – the value is in the product's potential. Not the company's net income.
That’s not a bad way to approach things, I suppose. It shows that the people building the product really want to build something amazing. They’re not just in it to squeeze every dollar out of it. That being said, I still have trouble justifying buying a stock that didn’t make a profit. (Tableau shareholders sure proved me wrong though!)
I don’t know what my opinion is of Salesforce’s purchase. I’ve always been a begrudging lover of Tableau. It’s almost too good of a product. It makes dashboard builds a little too easy. I enjoyed the puzzle aspect of other BI tools, such as SSRS, even though they are less efficient than Tableau.
But the thing I truly admired about Tableau is that it changed the focus of BI work from "how do I program this dashboard" to "how do I make this data easier to understand." I doubt that will quality change with their sale.
Another big thing Tableau had going for it though was the coolness factor. Everyone wanted to use Tableau. It was the underdog in the fight against Microsoft, Oracle, and SAP.
Will Tableau still be the cool kid now that it’s sold out to the largest CRM software in the world? I guess we’ll see. I do know one thing though – kudos to the people who invested in Tableau. You’ve earned your payout.