Salesforce co-founder and CEO Marc Benioff said the company was moving quickly to “reassess” its strategy and focus on profits as it faces increasing pressure from activist investors.
In a bullish call following a better-than-expected earnings report that sent Salesforce shares up 15 percent in after-hours trading, Benioff told analysts, “We’ve been hitting the hyperspace button since we last spoke a quarter ago. Changes that used to take months now take weeks.”
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 those activists were critical of deal making and spending.
Benioff’s preference for growth over higher profits also came under scrutiny, as did his acquisitions of data analytics groups Tableau and Slack, the work chat app it bought for $28 billion at the height of the pandemic.
Benioff spoke to these concerns during Wednesday’s analyst call, saying “profitability is really our most important strategy,” describing operating margins as the company’s “north star.” He predicted adjusted margins would hit 27 percent in 2024, ahead of the original forecast to hit that figure in 2026.
“We’ve never had a focus on efficiency at the company before because we’ve had 24 years of nothing but grow, grow, grow. . . we are currently looking to reassess,” Benioff said.
The call came after the workplace software company posted fourth-quarter revenue of $8.4 billion, beating expectations of $7.99 billion, and higher-than-expected adjusted margins of 22.5 percent.
Those results give Benioff some breathing room as he battles with at least five activists — Elliott Management, Starboard Value, ValueAct Capital, Inclusive Capital Partners and Third Point Management — who are pushing for a shake-up in the company.
Ahead of Wednesday’s results, Elliott nominated a string of directors to Salesforce’s board of directors, adding pressure to the company.
The activist hedge fund presented its candidates after “constructive but intense” discussions with the company, according to a person familiar with the matter. It is unknown 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, is not focused on a settlement and sees the nominations as exerting “maximum pressure,” the person said.
San Francisco-based Salesforce has made other concessions: In late January, it named three new directors to its board of directors, including Mason Morfit, the CEO of ValueAct, which is also an investor, and announcing that it would buy about 10 percent of the workforce. good for about 8,000 employees.
During Wednesday’s phone call, the company announced that it would dissolve its M&A committee. While focusing on profitability, the company said it was no longer focused on reaching $50 billion in annual revenue by 2026, citing the “uncertain macro and currency environment”.
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