by Salesforce co-founder and CEO Marc Benioff said the company is moving quickly to “rethink” its strategy and focus on profits as it faces increasing pressure from activist investors.
In a bullish call after a better-than-expected earnings report, Benioff told analysts on Wednesday: “We hit the hyperspace button since we last spoke a quarter ago. Changes that used to take months are taking weeks.” Salesforce shares maintained their after-hours gains, rising more than 15 percent in premarket trading Thursday.
Salesforce has faced an onslaught from activist investors in recent months, after its stock price fell more than 45 percent from the peak of the coronavirus pandemic. Many of these activists have been critical of its deal-making and spending.
Benioff’s preference for growth over higher profits has also come under scrutiny, as have his takeovers of data analytics group Tableau and Slack, the workplace chat app it bought at the height of the pandemic for $28 billion.
Benioff addressed those concerns on Wednesday’s analyst call, saying “profitability is really our number one strategy,” and describing operating margins as the company’s “north star.” He predicted adjusted margins would reach 27 percent in 2024, ahead of the original forecast to reach that mark in 2026.
“We’ve never had an efficiency focus in the company before, because we’ve had 24 years of just growing, growing, growing. . . we’re looking at this moment to reassess,” Benioff said.
The call came after the workplace software company reported revenue of $8.4 billion in the fourth quarter, versus expectations of $7.99 billion, and higher-than-expected adjusted margins of 22.5 percent.
Those results give Benioff some breathing room as he contends with at least five activists — Elliott Management, Starboard Value, ValueAct Capital, Inclusive Capital Partners and Third Point Management — pushing for a shakeup at the company.
Ahead of Wednesday’s results, Elliott nominated a slate of directors to Salesforce’s board, increasing pressure on the company.
The activist hedge fund presented its nominees after “constructive but intense” talks with the company, a person familiar with the matter said. It is not known how many people Elliott plans to nominate or who they are.
The hedge fund, which has built a reputation as one of the most aggressive activists on Wall Street, was not focused on a settlement and saw the nominations as “maximum pressure,” the person said.
San Francisco-based Salesforce has made other concessions: nominating three new directors to its board in late January, including Mason Morfit, CEO of ValueAct, which is also an investor, and announcing it will cut about 10 percent of its workforce, amounting to team 8,000 employees.
On Wednesday’s call, the company revealed that it was in the process of disbanding the mergers and acquisitions committee. While it focused on profitability, the company said it no longer aimed to reach $50 billion in annual revenue by 2026, citing the “uncertain macro and currency environment”.
