Arik Hesseldahl

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Salesforce Acquires Hosted Apps Platform Heroku

A day after launching a hosted database service, announced this morning that it will pay $212 million in cash for the privately held Heroku, a hosted service for applications written in Ruby on Rails, the open-source Web-development language.

Launched in 2007 with seed funding from Y Combinator, Heroku landed $10 million in a B Round led by Ignition Partners in May. Other investors include Redpoint Ventures, Baseline Ventures and Harrison Metal Capital.

Heroku has made a name for itself as a hosting service for Facebook applications. Its most widely cited customer is Cardinal Blue, whose Facebook apps include Travel Balloon and QuizCreator. Other Heroku customers include Clobby, a group chat application, and FlightCaster, which makes a handy application that predicts flight delays.

Heroku founder James Lindenbaum said in a blog post that Heroku will remain independent. Parker Harris, Salesforce’s EVP of technology said of Heroku on the official company blog: “This is the platform as a service I would have wanted to build apps on had it existed in 1999.”

By acquiring Heroku, Salesforce is getting into the business of development in Ruby on Rails, a widely used open-source Web development language that’s been used to build Web brands such as Twitter, Groupon and Hulu.

Heroku employees will get about $27 million worth of Salesforce shares, and Salesforce will pay about $10 million for unvested Heroku shares. All consider its a big acquisition for Salesforce, which had about $770 million in cash and short-term investments in the bank as of the quarter ended Oct. 31. However, the market seems to like the deal, as Salesforce shares are trading up 2.5 percent, or $3.63, as of 6:45 am PT.