Software's Resurgence: Scott Martin on WDAY Acquisition Talks, CRM & ADBE Strengths

**SPEAKER_1** (0:00)
Let's go deep on the software space and our tech spotlight. Joining me right now, Scott Martin, Senior Analyst, Kramer Capital Research. I'm so glad you're with us because we've gotten that possible deal with Silver Lake making a bid for Workday. It gave a big boost to Workday. It was up 17, 18% yesterday. And Barron's reporting, this kind of interest from private equity circling could really help the whole software group, which has been in somewhat of a sass-pocalypse at times. Some of your thoughts on Silver Lake and Workday, we haven't heard from the companies to really know whether or not it's 100% true.

**Scott Martin** (0:39)
Yeah, Nicole, thank you very much. First and foremost, clearly, this is the kind of rumor. It is still a rumor, like you said, that people can buy because it proves, this is the rumor that proves a couple of truths. First and foremost, private equity has got a lot of dry powder on the table, and those deep wallets could not find a way to deploy it. This is their chance. They've been waiting for a moment like this somewhere. And I guess it's SAS names. Software was beaten down to doomsday levels. Apparently, that was grossly overdone because in the event that deep pockets go for this, clearly, there's a great business there. And we can talk about why, but I think realistically, software is a service. People sold it for a reason, but it was the wrong reason. And now, big buyers are coming in.

**SPEAKER_1** (1:26)
Yeah, I mean, it really could be viewed as a price floor, maybe even for other potential takeout candidates. But tell me why you think there is such an interest here in Workday in particular.

**Scott Martin** (1:37)
Well, Workday in particular had that magic sweet spot of being really beaten down to a level, you know, right now, it's still at five times sales.
Forget about profit for a strategic buyer. That's a really attractive level because they can do a whole lot of things with that. But the business itself is not going away. I mean, Workday, that company is still growing. It's just no longer a hyper growth name like the AI names that everyone's grabbing instead.

**SPEAKER_1** (2:05)
Yeah, and I look at some of the other names in the group, everything from Salesforce, which is down over one year, 16 percent, ServiceNow down 27 percent, and there's so many others, Adobe and Procure and UiPath and GitLab, so many names here. But does it bring some confidence to the group overall as an investor of this group, the SaaS group?

**Scott Martin** (2:31)
I think it brings tremendous confidence because like you said, that floor is there, but it also brings opportunity because a lot of investors watching this were sleeping on the opportunity that maybe these names will not go all the way. They're never going to be trillion dollar giants. They don't need to be because some trillion dollar giant is going to buy them at the right price. And so we can take this Workday, you know, proposed deal, work the comps and find out what's worth buying out there.

**SPEAKER_1** (2:57)
The concern was that new AI tools would make some of these software names obsolete. Did you find that to be true or have merit?

**Scott Martin** (3:07)
We at Kramer never really believed that because these are great companies and even if the direct to consumer or direct to human enterprise trade softens a little bit, you know, on the agentic platforms, there are more agents theoretically than people who can subscribe to these accounts. And that's where these companies, the smart ones that make the transition to the agentic universe, that's where they're going to make their real money. That's how they're going to survive and thrive.

**SPEAKER_1** (3:35)
Tell me about some of the names that you like in the group.

**Scott Martin** (3:39)
The names we like.
Taking Workday as our benchmark here, 5X sales. So run the list and you find that Adobe, Intuit, CRM even could be in play at the right level. The problem with these big names is Silver Lake, who's rumored to be buying Workday, they're only $100 billion of companies. So they don't really have the money to reach out and buy a $120 billion, $200 billion company. They've got to think a little bit smaller. Starting with, I think Adobe's the biggest it's going to get. They could be in play at the right price. Otherwise, DocuSign. DocuSign, we ran the math, it could be worth $83 a share just as a takeout bid.

**SPEAKER_1** (4:22)
Yeah, I was thinking how Silver Lake helped to turn around Dell, right?