Salesforce co-founder and chief executive Marc Benioff said the company was moving quickly to “reassess” its strategy and focus on profits as it faces growing pressure from activist investors.
In a bullish call following a better than expected earnings report that sent Salesforce shares up 15 per cent in after-hours trading, Benioff told analysts: “We hit the hyperspace button since we last spoke a quarter ago. Changes that used to take months are taking weeks.”
Salesforce has faced an onslaught from activist investors in recent months, after its share price dropped more than 45 per cent from its coronavirus pandemic peak. Many of those activists have been critical of its dealmaking and spending.
Benioff’s preference for growth over higher profits also came under scrutiny, as have his takeovers of data analytics groups Tableau and Slack, the workplace chat app it bought at the height of the pandemic for $28bn.
Benioff spoke to those concerns on Wednesday’s analyst call, saying “profitability is truly our number one strategy”, and describing operating margins as the company’s “north star”. He predicted adjusted margins would hit 27 per cent in 2024, ahead of its original forecast to meet that mark in 2026.
“We’ve never had an efficiency focus at the company before because we’ve had 24 years of just grow, grow, grow . . . we’re looking at this moment to reassess,” Benioff said.
The call came after the workplace software company posted fourth-quarter revenues of $8.4bn, against expectations of $7.99bn, and higher than expected adjusted margins of 22.5 per cent.
Those results give some breathing room to Benioff as he contends with at least five activists — Elliott Management, Starboard Value, ValueAct Capital, Inclusive Capital Partners and Third Point Management — that are pushing for a shake-up 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 put forward 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 earned a reputation as one of the most aggressive activists on Wall Street, is not focused on a settlement and sees the nominations as applying “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, the chief executive of ValueAct, which is also an investor, and announcing it would cut about 10 per cent of its workforce, amounting to about 8,000 employees.
On Wednesday’s call the company disclosed it was disbanding its mergers and acquisitions committee. While it focuses on profitability, the company said it was no longer targeting reaching $50bn on annual revenue by 2026, citing the “uncertain macro and currency environment”.