Salesforce co-founder and CEO Marc Benioff said the company is rushing to “reaffirm” its strategy and focus on profitability as it faces pressure from activist investors.
In a bullish call after a better-than-expected earnings report that sent Salesforce shares up 15 cents in after-hours trading, Benioff told analysts: “We’ve been hitting the hyperspace button since we last spoke a quarter ago. The changes that used to take many months take weeks.
Salesforce has faced attacks from activist investors in recent months, after its share price fell more than 45 percent from the peak of the coronavirus pandemic. Many of these activists are critical of dealmaking and spending.
Benioff’s preference for growth over higher profits is also under scrutiny, as is his take on data analytics group Tableau and Slack, the workplace chat app he bought during the pandemic for $28bn.
Benioff addressed the concerns of analysts on Wednesday’s call, saying “profitability is really our number one strategy”, and described the operating margin as the company’s “north star”. He predicts adjusted margins will reach 27 percent in 2024, ahead of his original forecast to reach that mark in 2026.
“We’ve never focused on efficiency in the company before because we’ve been growing, growing, growing for 24 years. . . we’re looking at the moment to reassess,” Benioff said.
The call came after the workplace software company posted fourth-quarter revenue of $8.4bn, against expectations of $7.99bn, and an adjusted margin of 22.5 per cent.
The 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 — who are pushing for a shakeup at the company.
Ahead of Wednesday’s results, Elliott nominated a director of directors to Salesforce’s board, increasing pressure on the company.
The activist hedge fund released its nomination after “constructive but intense” talks with the firm, people familiar with the matter said. It is not known how many people Elliott plans to nominate or who are.
The hedge fund, which has earned a reputation as one of the most aggressive activists on Wall Street, is not focused on the settlement and sees the nomination as “maximum pressure,” the person said.
San Francisco-based Salesforce has made another concession: it nominated three new directors to the board at the end of January, including Mason Morfit, chief executive of ValueAct, which is also an investor, and announced that it will reduce about 10 percent of its workforce, totaling approximately 8,000 employees.
On Wednesday, the company announced that it was disbanding its mergers and acquisitions committee. While focusing on profits, the company said it was not targeting around $50bn in annual revenue by 2026, citing an “uncertain macro and currency environment”.