Many stocks declined during the market's rout on Monday, but business software company ServiceNow (NOW -7.85%) lost more than most. On news of yet another acquisition, investors traded out of the specialty tech stock, leaving with a loss of just under 8% on the day. That was a steeper fall than the S&P 500 index's 2.7% decline.
ServiceNow announced that it has signed a definitive agreement to purchase Moveworks, a privately held artificial intelligence (AI) solutions developer that targets large enterprises. The acquirer said that it will combine Moveworks' front-end AI assistant and search technology with its native AI technology.
For its new asset, ServiceNow is to pay $2.85 billion in a combination of cash and stock. The company did not get specific about the mix.
In the press release heralding the deal, ServiceNow wrote that combining the pair "will redefine the value of how to put AI to work, setting a new standard for the future of employee engagement with a powerful universal AI assistant, along with more perceptive AI‑based enterprise search, to find fast answers to requests, automate and complete everyday tasks, and increase productivity."
Moveworks certainly has an impressive client list. On its website, it lists such familiar (and diverse) names as Spotify, Broadcom, and Unilever.
The investor reaction to the news was in contrast to ServiceNow's announcement at the end of February that it had acquired Quality 360, a manufacturing industry software platform, from Swedish peer Advania. The stock popped on that development.
The sour reaction to this one could have something to do with the price tag -- $2.85 billion is nearly the total non-GAAP (adjusted) net income the company booked for full-year 2024 and isn't far from its less than $3.5 billion free cash flow for the year.
Meanwhile, investors have grown concerned that the heavy spending by some tech companies on AI won't sufficiently pay off in the great AI gold rush we're experiencing now.
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