Microsoft, Salesforce Talks Fizzled Over Price, Sources Say

Key Speakers At 2014 The DreamForce Conference


Microsoft (MSFT) and (CRM) had significant talks earlier this spring about a purchase of Salesforce by Microsoft, according to a number of people familiar with the situation. While the two sides failed to reach a deal and haven’t re-engaged, the talks advanced to a level of detail that indicates they were serious.

Ultimately, the two companies remained far apart on a price, with Microsoft said to be willing to offer roughly $55 billion for the company, while its founder and CEO Marc Benioff is said to have kept raising his expectations to as high as $70 billion.

The deal envisioned Microsoft using a significant portion of its $95 billion cash pile to pay for Salesforce, but there was discussion of allowing Benioff to roll his 5.7 percent stake in Salesforce into Microsoft stock, while other shareholders would have gotten paid in cash. Benioff would have had a management role at Microsoft under the deal, according to people close to the talks.

Salesforce was engulfed in takeover rumors late last month when Bloomberg reported on an approach of an unnamed suitor that wasn’t Microsoft, for the company. Bloomberg also reported earlier this month that Microsoft was evaluating a bid for Salesforce, but said no talks between the two companies were taking place. Both reports sent shares of Salesforce sharply higher.

The talks that did in fact take place between the two companies concluded by early May and aren’t expected to re-emerge anytime soon. In addition to a disparity in price expectations, Microsoft’s CEO Satya Nadella, who has been in the job for only 18 months, was said to be somewhat reluctant to pull the trigger on a deal of such size and consequence for his company.

Still, a number of people close to the talks believed they had the momentum to have reached a deal, until price became a defining road block.

Read MoreSalesforce shares climb on earnings beat
Salesforce, which has a leading position in customer relationship management software and cloud computing is thought to be a good fit for Microsoft, which is focused on gaining scale in those businesses.

A Microsoft spokesman declined to comment and a Salesforce spokesperson didn’t return phone calls.

How to Embrace Healthy Risk in Investing

Risk Just Ahead on Green Billboard.
“Risk” doesn’t have to be a four-letter word. Yes, 2008’s losses still sting. But here’s how to start steering by looking out the windshield and finally giving up the rearview mirror.

It’s best to master the process of moving on, says Lauren Cohen, professor of finance at Harvard Business School. “There will be another downturn — hopefully, less painful,” he says. Market downturns are so hard to shake off, he says, because human psychology puts greater weight on losses than commensurate gains. In other words, you feel worse about losing $1 than you feel happy about gaining $1. It’s hard to lead with your head and ignore your gut, but that’s what it takes to get over steep losses, according to Cohen and other advisers who study risk.

Learn From Your Mistakes

First, learn from your mistakes, Cohen says. During the Great Recession, if you bailed out at the trough in 2009, you probably suffered the worst losses. Next time, hang tight. “Risk is not a one-year downturn. Retirement is a 10- to 40-year goal, so you have to think of your investment risk over that period,” Cohen says. “Match your investments with the goal. The goal is to have accumulated enough by the time you retire, not right now.”

Take a hard look at how much you can stand to lose before you make any plans to invest your money, recommends Samuel K. Won, founder and managing director of Global Risk Management Advisors, an investment risk management advisory firm to institutional investors and asset managers.

“If there was a market downturn, and there will be, are you comfortable with, and can you afford to lose, 20 percent of your portfolio?” he asks. Before you make asset allocation decisions, figure out how much you can afford to lose. That should be one of the first considerations an investor takes into account before making any changes to an investment portfolio, he says.

Most people, of course, must take on a minimum amount of risk to keep at least part of their portfolio growing to generate enough income to keep up with their needs as they age.

Separate Your Portfolio

Separate your portfolio into two sections: a lower-risk portion that is associated with a minimal return that enables you to retire with commensurately lower risk, and an upper-risk portion that is associated with the maximum level of risk that you can tolerate and will drive growth. This design will position you so that you “don’t lose so much that you are taking 10 steps backwards when the next major market downturn emerges,” Won says. Currently, bonds do not yield much, but you won’t lose anything, either.

It’s important to remember that making up losses will be hard because you will be rebuilding from a smaller base. In other words, if you lose 30 percent of $10, the $7 you have left will have to increase by 43 percent to restore the account to $10.

Ted Fischer, president of Fischer Investment Strategies, a financial planning firm in Westlake Village, California, has clients create “buckets” for risk: short-term savings with low risk (as for a house down payment); longer-term savings for growth; and longer-term savings with less risk. “If you show clients that the short-term bucket didn’t see much loss because they were in low-risk [investments], then people feel confident that they will hit their short-term goals, while still having risk runway to achieve their long-term goals,” he says.

Won points out that due to the financial crisis of 2008, many rules and regulations have tightened risk parameters in the investment industry. “Lots of asset managers are being forced to do much more formal and enhanced risk management to cover their fiduciary risks, and individuals should also be doing the same,” he says.

Assess Your Risk Profile

When you are working with a financial adviser or registered investment adviser, consider getting a second opinion on the risk profile of your portfolio, Won adds. Your goal is to make sure the amount of risk your adviser recommends isn’t affected by how he or she is paid for working with you, either by fees or commissions. Also take a cue from institutional money managers and conduct annual risk checkups to make sure your portfolio is still within your risk tolerance level, and see how your portfolio is performing compared with several types of benchmarks — such as stock and bond indexes — so you can gain context for how much you are gaining for the risk you are taking.

One way to gain insight is by looking at Morningstar’s risk ratings for variousmutual funds. “Look at the fund’s volatility — how much has it gone up or down? No, the past doesn’t guarantee the future, but it does show volatility,” Won says.

If all this sounds too theoretical, try translating some of the what-if-the-market-crashes scenarios into real-life implications, Fischer says. “If your portfolio lost 14 percent or 20 percent, what would that mean for when you retired and with how much?” he says. Balance that with this truth: “It’s hard to rebuild if you aren’t willing to take the risk,” Fischer says.

Class of 2015: Want to Become Multimillionaires? Here’s How


Asian college man with diploma classmates

To the new graduates of the class of 2015: Congratulations on your tremendous accomplishment. As you start your life and career, know that a world of opportunity awaits you. You have a future in front of you that your older soon-to-be-coworkers can only dream of.

One such opportunity available to you is your once-in-a-lifetime shot at setting yourself up to become a multimillionaire by the time you retire. Unfortunately, the chance is only available for a limited time, and the longer you wait to claim your chance at earning that elusive status, the tougher it will be for you to get there.

Why You Have This Chance at $2 Million or More

The key reason a $2 million nest egg may be within your reach is because you have three key advantages your older co-workers don’t have.

Advantage No. 1: Your age. The younger you are, the more time your money has to grow before you retire. One rule-of-thumb guideline in investing is known as the Rule of 72. To use it, you divide 72 by the rate of return you anticipate earning on your investments, and the result is the approximate number of years it will take for your money to double.

Over the long run, the stock market has returned a bit more than 9 percent in annualized returns. If that keeps up, the Rule of 72 indicates that money you invest in stocks could double about once every eight years. If you’ve got a 40-year career ahead of you, your money can potentially double five times. As a result, every $1,000 you put away this year can potentially be worth $32,000 at retirement.

That advantage rapidly diminishes, however. If you wait a few years to “establish yourself” before you start investing, you’ll lose one or more of those doubling periods. Miss just a single doubling period, and that $32,000 for each $1,000 invested becomes $16,000 instead.

Advantage No. 2: Your lifestyle. As you’re just preparing to start out in life, you likely have few of the “trappings of success” that may have afflicted your more established coworkers. Indeed, if you’re used to living like a broke college student, continuing a similar lifestyle once you find yourself gainfully employed is one of the best tools you have to reach multimillionaire status.

Consider college-like choices such as living with a roommate, driving a reliable used car or taking public transit, buying food in bulk and getting creative with leftovers, and shunning small luxuries like cable TV. On top of that, you can better stretch your paycheck by doing things like keeping your wardrobe simple (but appropriate for your chosen career) and sticking to a limited budget for “office networking” activities.

Because you’re just starting out, aside from potential student loans, you likely don’t have high embedded lifestyle costs that, once you start getting used to them, can be surprisingly hard to get rid of. Keep your lifestyle costs as close to that “broke college student” state as you can for as long as you can, and you’ll be surprised at how much easier it will be to find money available to invest for your future.

Advantage No. 3: Your health and vitality. Generally speaking, as we humans age, our health care costs increase. The younger you are, the less likely you are to have a serious and expensive health condition. That helps you in two ways. For one, the healthier you are, the less you’re spending directly on health care. Also, the healthier you are, the more likely you are to be able to either work extra hours at your job or at a second job to come up with some spare cash to invest.

Leverage Your Advantages for Your $2 Million Opportunity

Those three key advantages give you the opportunity to become a multimillionaire, but only if you put them to work for you. The table below shows how much you have to invest each month to wind up with $2 million, depending on how long you invest and what rate of return you earn:

Years 10% Annual Returns 8% Annual Returns 6% Annual Returns 4% Annual Returns
45 $191 $379 $726 $1,325
40 $316 $573 $1,004 $1,692
35 $527 $872 $1,404 $2,189
30 $885 $1,342 $1,991 $2,882
25 $1,507 $2,103 $2,886 $3,890
20 $2,634 $3,395 $4,329 $5,453
15 $4,825 $5,780 $6,877 $8,127
Calculations by author

By starting as a young professional just out of college and investing for long-run stock market potential returns, just a few hundred dollars per month can get you to multimillionaire status at retirement. But notice how much substantially more expensive that gets the longer you wait. If you think it’s tough coming up with $300 a month as a new hire, think how tough it will be to go from $0 to $1,500-plus per month as a mid-career professional who didn’t leverage those advantages.

The market provides no guarantees, of course, but all else equal, the sooner you get started, the less you have to put away each month and overall to reach your goal.

You Don’t Have to Go It Alone

Perhaps best of all, you are very likely to be able to get help coming up with the money to invest, from your boss and Uncle Sam. If your job offers a 401(k), 403(b), TSP or similar qualified retirement plan, you can contribute up to $18,000 a year to that plan if you’re under age 50.

In a traditional style plan, you contribute pre-tax dollars, which means Uncle Sam covers part of the cost through you having less money subject to income taxes. In a Roth style plan, you pay taxes on your contributions, but you can potentially withdraw your money tax-free in retirement. In either case, your money grows tax-deferred while in the plan.

On top of those advantages, if your employer offers a matching contribution, that’s additional money going toward your plan that doesn’t come out of your pocket. Between the match and the tax break, you can potentially double the money going toward your investments when compared to what it costs you out of pocket.

Regardless of whether your boss offers such a plan, if you have earned income, if you’re under age 50 you can contribute up to $5,500 a year to an IRA. IRAs likewise come in both traditional and Roth varieties, with the traditional offering a potential tax deduction for your contribution and the Roth offering the potential of tax-free withdrawals in retirement. Both styles offer tax deferrals while your money remains in the plan, compounding on your behalf.

Between Uncle Sam and your boss, you can get some serious help reaching your savings goals. The dollars in the table above don’t care whether they came from your pocket, your boss’s or Uncle Sam’s. As long as they find their way to your account, they can be put to work for you.

Class of 2015: Get Started Now

As a young adult graduating as a member of the class of 2015, you have a tremendous opportunity to become a multimillionaire. The sooner you get started, and the more consistently you invest toward that goal, the better your chances are of reaching it successfully. The longer you wait, the tougher and more expensive it will be for you to turn that goal into your reality.

If you can’t invest your full targeted amount on your entry-level salary, don’t despair. Invest what you can, and work your way up to your target over time as your salary increases and you figure out how to trim costs from your budget. No matter what your starting state, one of the most important steps you can take is to get started now, to put time and your other advantages firmly on your side.


Why You Need More Cash for Retirement Than Your Parents

Couple with Coffee and Prezels in City Park, New York City, New York, USA
If your 401(k) plan is doing OK and your Individual Retirement Account is flushed out, you may think you’re doing pretty well for retirement, especially compared to your parents who likely saved a small portion of what’s sitting in your retirement account. The problem is, you need a lot more money than your parents did to enjoy a similarly affluent or even comfortable retirement. Here are six reasons you need more money to retire than your parents did — and more money than you probably think.

1. Life Expectancies Have Increased

In the 1950s, the average American life expectancy was 68 years. Today it is 79 years. In other words, we’re living a decade longer than our parents did, and most of those extra years occur during retirement. Of course, for the most part, this is a good thing. But it does mean we have to finance another 10 years of retirement at a time when we’re still spending money but no longer earning a paycheck.

2. Social Security Doesn’t Pay as Well

In 1983, President Reagan and Congress made a deal to overhaul the Social Security system. For the first time, benefits were subject to federal income tax. Some states also tax benefits. In addition, the retirement age was raised for future beneficiaries. So now the full retirement age (the age you qualify for full benefits) for people born between 1943 and 1954 is 66 instead of 65. For people born after 1954 the full retirement age will gradually increase until it reaches 67 for those born after 1959. The results of these changes: Some of our current benefits are taken back in taxes, and our lifetime benefits are curtailed because we start receiving them a year or two later.

3. The Pension System Has Changed

In recent years many private corporations have shifted from defined benefit plans to defined contribution plans. This means that companies are willing to chip in to your retirement fund through 401(k) plans or similar types of retirement accounts, but they are no longer taking the responsibility for providing you with a guaranteed income for life. Now, to afford a good retirement, it’s up to you to save enough money, invest it wisely and avoid all the financial pitfalls that can jeopardize your future income.

4. Out-of-Pocket Health Care Costs Are Rising

Over the last couple of decades health care costs have increased at two and three times the rate of general inflation. Even today, with inflation close to zero, medical expenses are increasing at a rate of 2 to 4 percent. The cost of medical care has gone up, deductibles have grown, the cost of insurance has increased and retiree out-of-pocket health costs have been rising, again resulting in a need for more wealth at retirement.

5. Interest Rates Are Low

For the past half dozen years the Federal Reserve has kept interest rates artificially low, which presumably helps the economy by encouraging people to buy cars and houses. But this comes at a cost to people who have saved up money for retirement. The interest you get from a 10-year bond or the dividend you receive from many stocks is less than 2 percent. Your parents could put money in the bank and draw 5 percent interest. The rate you get from a bank today is virtually zero. So no matter how you invest it, you need more wealth to generate a given stream of income.

6. The Kids Are Still on the Payroll

A lot of adult children have moved back home due to financial pressures. According to a survey by Pew Research, some 36 percent of 18 to 31-year-olds were still living at home in 2012. But even if the kids have moved out, a lot of parents still want to help — whether it’s helping to pay off college loans, subsidizing their rent, paying travel costs for family reunions or contributing to college funds for the grandchildren. All these activities come from a generous place in the heart, but they all cost money and create yet another burden for your retirement nest egg.

Tom Sightings is a former publishing executive who was eased into early retirement in his mid-50s. He lives in the New York area and blogs at Sightings at 60, where he covers health, finance, retirement and other concerns of baby boomers who realize that somehow they have grown up.

How to Enjoy Retirement If You Haven’t Saved Enough

Older man looking frustrated while reviewing bills
Are you ready to retire, but haven’t managed to save enough yet?

In fact, the U.S. Census Bureau of Labor Statistics says that although the average retirement age is 62, many seniors are retiring at age 65 or older and a large percentage — roughly 80 percent — still won’t have saved enough by then. Of them, about a third will depend entirely on Social Security benefits. If you’re within five years of calling it quits but haven’t saved enough to retire, here are a few steps that may bring retirement closer within reach.

1. Wait Until You’re 65. Wait until you’re age 65 or older before you start collecting Social Security benefits, as the longer you wait, the larger your benefit. Use Bankrate’s Social Security benefit calculator to estimate your future payments.

2. Don’t Wait to Downsize. Consider selling your home and investing the profits. Downsize to a lower-cost senior living community or condominium in an area where your property taxes will be affordable. You can also inquire about school parcel tax exemptions that allow seniors to apply for tax exemption from taxes imposed by local school districts.

3. Move to a No Tax State. Move to a state with no income tax on pension, Social Security or dividend income. Florida, Nevada, New Hampshire, Pennsylvania, Washington and Wyoming are among the states that don’t tax that income.

4. Accept Government-Sponsored Medical Insurance. Medicare provides adequate health insurance coverage for doctor’s visits, emergency care, assisted living, etc., but doesn’t cover prescription drugs, dental or vision care. For this, you will need add-on coverage like those offered by Medicare Advantage and Supplemental Insurance, known as Medigap. Consult with your insurance provider prior to retirement to ensure you can afford proper health insurance coverage. If you can’t, inquire about government subsidies or senior plans offered by the likes of AARP.

5. Max-Out Retirement Accounts. By now you should be fully funding all of your retirement accounts and making any catch-up contributions. The 2015 catch-up contributions for IRAs total an additional $1,000 ($6,500) and $6,000 ($24,000) for your 401(k). As they are the most tax advantageous, make sure you are fully funding these accounts over the next few years preceding your retirement.

6. Diversify Using Bonds and ETFs. As you are nearing retirement age, you will want to gradually rebalance your portfolio so that it has less of volatile investments such as stocks, and more of safer investments such as bonds and exchange-traded funds, or ETFs.

7. Join AARP. The benefits of joining AARP are endless. For those unfamiliar, AARP is the popular senior citizens advocacy group. The annual membership fee is only $16 and is discounted even further when years are bought in bulk. Members receive invaluable discounts on dining, travel, roadside assistance, auto insurance, health benefits and more. This is a program that’s definitely well worth signing up for.