Salesforce adds social media muscle with Buddy Media buy

(Reuters) - Salesforce.com Inc will buy Buddy Media, which helps big brands manage Facebook and Twitter pages, for about $689 million, in the latest sign that the social media marketing sector may be a new battlefield for large tech companies.

Salesforce's biggest ever deal follows rival Oracle Corp's acquisition of social media marketing company Vitrue. Industry website TechCrunch said the Virtue deal was for $300 million.

Buddy Media, which allows customers to publish content and measure the effectiveness of social media marketing programs, serves Ford Motor Co, Hewlett-Packard Co, L'Oreal SA and Mattel Inc.

The five-year-old company, co-founded by its CEO Michael Lazerow, chose Salesforce's offer over Google Inc's, the All Things Digital website reported last week.

Lazerow has co-founded four other internet-based media companies. CBS Corp and Time Warner Inc have bought one each.

Buddy Media's investors include global advertisement company WPP Plc, Japan's SoftBank Capital, two founders of Angel Investors LP, Zynga Inc's CEO Mark Pincus and venture capitalist Peter Thiel.

Salesforce, which provides online sales management tools, said it will merge Buddy Media with its Radian6 business that helps clients track customer trends on social media sites.

"While the $689 million price tag ... is not cheap, we note that it values the company roughly in line with other recent deals in the social media marketing space," Evercore Partners analyst Kirk Materne said in a research note.

Materne, who has an "overweight" rating on Salesforce's stock, said the near-term hit to margins is worth the long-term benefit of building a premiere social media marketing platform.

Salesforce cut its adjusted full-year profit to $1.45 to $1.49 per share, from $1.60 to $1.63 per share, to factor in charges from the deal.

The company raised its revenue outlook to $2.99 billion to $3.03 billion, from $2.97 billion to $3.00 billion.

The transaction is for about $467 million in cash, $184 million in stock, and $38 million invested Salesforce options and restricted stock units.

The deal is expected to be completed during the third quarter, the company said in a statement.

Shares of Salesforce, which closed at $130.99 on Friday on the New York Stock Exchange, fell 2 percent to $128.20 in trading before the bell on Monday.

(Reporting by Sayantani Ghosh in Bangalore; Editing by Roshni Menon and Don Sebastian)