Changes afoot at Salesforce after activist investor Elliott takes a decisive slice
(2023/01/23)
- Reference: 1674484390
- News link: https://www.theregister.co.uk/2023/01/23/changes_afoot_at_salesforce_after/
- Source link:
Activist investor Elliott Management has taken a multi-billion dollar stake in Salesforce, which has disappointed markets with its recent growth, in a move that could signal further cost-cutting or divisional selloffs at the CRM giant.
In a statement, Jesse Cohn, managing partner at Elliott, said Salesforce was one of the pre-eminent software companies in the world. "We have developed a deep respect for [CEO] Marc Benioff and what he has built. We look forward to working constructively with Salesforce to realise the value befitting a company of its stature."
Elliott has a track record of forcing change at tech companies, with [1]Citrix , [2]Commvault and Western Digital among its targets in recent years.
[3]
It is "never a good sign when Elliott shows up," Constellation Research principal analyst and founder Ray Wang [4]took to Twitter to say in response to the news of Elliott's adopted position among Salesforce investors.
Activist investor forces search for new chief exec, restructuring [5]READ MORE
Salesforce's [6]market capitalization is around $151.3 billion, having lost around half its value since a peak in November 2021.
While the fall reflects the stock markets around the world — and tech shares in particular — there are reasons to single out Salesforce's performance.
[7]
[8]
The company earlier this month announced [9]a 10 percent cut to its workforce "intended to reduce operating costs, improve operating margins, and continue advancing the Company's ongoing commitment to profitable growth."
At the time, Benioff said: "We hired too many people leading into this economic downturn we're now facing, and I take responsibility for that."
[10]
The signs were there in the middle of last year. Speaking to investors following its Q2 results, [11]Benioff said customers were "becoming more measured in the way they buy" and that "sales cycles can get stretched."
When it buys a chunk in a company, Elliott's track record shows it applies pressure for strategic changes and seeks board representation.
In June last year, storage supplier Western Digital was forced to consider "strategic alternatives," [12]including spinning out its flash and hard disk businesses following Elliott's acquisition of a $1 billion stake in WD.
[13]
Elliott elbowed its way onto the board of Citrix after acquiring a stake in 2015. Following the move, [14]Citrix sold its GoTo business, all but quit the server virtualization, and ditched its Xen brand .
[15]Gigamon is giga-gone! Networking vendor bought by private equity
[16]Citrix initiates 'Restructuring Program' – jobs and facilities to go
[17]Dell melts in face of investor dissent, ups offer for Class V stock
[18]Bolshy investors launch yet another assault on Emulex board
In 2018, Elliott accused Commvault of "numerous operational issues," "complex licensing, unrealistic quota-setting, ever-changing sales coverage and high employee turnover," after [19]it bought a stake in the data management company .
Where Elliott might start with Salesforce is up for grabs, but it could mean further job losses or a sell-off of one of its recent multi-billion dollar acquisitions, which have [20]attracted criticism since the company's growth began stuttering.
Whatever follows it is likely to lead to more tension in the Salesforce leadership. Benioff is known for his single-mindedness and as a man disinclined to take on outside advice, no matter how well-intentioned, a trait borne out by the recent departure of senior management and the end of the second attempt at the co-CEO model. ®
Get our [21]Tech Resources
[1] https://www.theregister.com/2015/07/29/citrix_ceo_templeton_to_retire/
[2] https://www.theregister.com/2018/05/02/commvault_q4_fy2018/
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offprem/saas&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2Y869L6QC0yvVZY61gjQlGgAAAEg&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[4] https://twitter.com/rwang0/status/1617348612236935168
[5] https://www.theregister.com/2018/05/02/commvault_q4_fy2018/
[6] https://ycharts.com/companies/CRM/market_cap
[7] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offprem/saas&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Y869L6QC0yvVZY61gjQlGgAAAEg&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[8] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offprem/saas&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Y869L6QC0yvVZY61gjQlGgAAAEg&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[9] https://www.theregister.com/2023/01/04/salesforce_7000_job_cuts/
[10] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offprem/saas&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Y869L6QC0yvVZY61gjQlGgAAAEg&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[11] https://www.theregister.com/2022/08/25/salesforce_q2/
[12] https://www.theregister.com/2022/05/03/elliott_management_to_wdc_board/
[13] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offprem/saas&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Y869L6QC0yvVZY61gjQlGgAAAEg&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[14] https://www.theregister.com/2020/04/17/activist_investor_elliot_management_departs/
[15] https://www.theregister.com/2017/10/27/gigamon_acquired_by_private_equity_elliot_management/
[16] https://www.theregister.com/2021/11/18/citrix_restructuring_program/
[17] https://www.theregister.com/2018/11/16/dell_melts_in_face_of_invest_dissent_ups_offer_for_class_v_stock/
[18] https://www.theregister.com/2013/05/09/altai_emulex_sales/
[19] https://www.theregister.com/2018/04/03/activist_investor_attacks_commvault/
[20] https://www.theregister.com/2023/01/10/salesforce_comment/
[21] https://whitepapers.theregister.com/
In a statement, Jesse Cohn, managing partner at Elliott, said Salesforce was one of the pre-eminent software companies in the world. "We have developed a deep respect for [CEO] Marc Benioff and what he has built. We look forward to working constructively with Salesforce to realise the value befitting a company of its stature."
Elliott has a track record of forcing change at tech companies, with [1]Citrix , [2]Commvault and Western Digital among its targets in recent years.
[3]
It is "never a good sign when Elliott shows up," Constellation Research principal analyst and founder Ray Wang [4]took to Twitter to say in response to the news of Elliott's adopted position among Salesforce investors.
Activist investor forces search for new chief exec, restructuring [5]READ MORE
Salesforce's [6]market capitalization is around $151.3 billion, having lost around half its value since a peak in November 2021.
While the fall reflects the stock markets around the world — and tech shares in particular — there are reasons to single out Salesforce's performance.
[7]
[8]
The company earlier this month announced [9]a 10 percent cut to its workforce "intended to reduce operating costs, improve operating margins, and continue advancing the Company's ongoing commitment to profitable growth."
At the time, Benioff said: "We hired too many people leading into this economic downturn we're now facing, and I take responsibility for that."
[10]
The signs were there in the middle of last year. Speaking to investors following its Q2 results, [11]Benioff said customers were "becoming more measured in the way they buy" and that "sales cycles can get stretched."
When it buys a chunk in a company, Elliott's track record shows it applies pressure for strategic changes and seeks board representation.
In June last year, storage supplier Western Digital was forced to consider "strategic alternatives," [12]including spinning out its flash and hard disk businesses following Elliott's acquisition of a $1 billion stake in WD.
[13]
Elliott elbowed its way onto the board of Citrix after acquiring a stake in 2015. Following the move, [14]Citrix sold its GoTo business, all but quit the server virtualization, and ditched its Xen brand .
[15]Gigamon is giga-gone! Networking vendor bought by private equity
[16]Citrix initiates 'Restructuring Program' – jobs and facilities to go
[17]Dell melts in face of investor dissent, ups offer for Class V stock
[18]Bolshy investors launch yet another assault on Emulex board
In 2018, Elliott accused Commvault of "numerous operational issues," "complex licensing, unrealistic quota-setting, ever-changing sales coverage and high employee turnover," after [19]it bought a stake in the data management company .
Where Elliott might start with Salesforce is up for grabs, but it could mean further job losses or a sell-off of one of its recent multi-billion dollar acquisitions, which have [20]attracted criticism since the company's growth began stuttering.
Whatever follows it is likely to lead to more tension in the Salesforce leadership. Benioff is known for his single-mindedness and as a man disinclined to take on outside advice, no matter how well-intentioned, a trait borne out by the recent departure of senior management and the end of the second attempt at the co-CEO model. ®
Get our [21]Tech Resources
[1] https://www.theregister.com/2015/07/29/citrix_ceo_templeton_to_retire/
[2] https://www.theregister.com/2018/05/02/commvault_q4_fy2018/
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offprem/saas&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2Y869L6QC0yvVZY61gjQlGgAAAEg&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[4] https://twitter.com/rwang0/status/1617348612236935168
[5] https://www.theregister.com/2018/05/02/commvault_q4_fy2018/
[6] https://ycharts.com/companies/CRM/market_cap
[7] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offprem/saas&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Y869L6QC0yvVZY61gjQlGgAAAEg&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[8] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offprem/saas&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Y869L6QC0yvVZY61gjQlGgAAAEg&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[9] https://www.theregister.com/2023/01/04/salesforce_7000_job_cuts/
[10] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offprem/saas&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Y869L6QC0yvVZY61gjQlGgAAAEg&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[11] https://www.theregister.com/2022/08/25/salesforce_q2/
[12] https://www.theregister.com/2022/05/03/elliott_management_to_wdc_board/
[13] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offprem/saas&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Y869L6QC0yvVZY61gjQlGgAAAEg&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[14] https://www.theregister.com/2020/04/17/activist_investor_elliot_management_departs/
[15] https://www.theregister.com/2017/10/27/gigamon_acquired_by_private_equity_elliot_management/
[16] https://www.theregister.com/2021/11/18/citrix_restructuring_program/
[17] https://www.theregister.com/2018/11/16/dell_melts_in_face_of_invest_dissent_ups_offer_for_class_v_stock/
[18] https://www.theregister.com/2013/05/09/altai_emulex_sales/
[19] https://www.theregister.com/2018/04/03/activist_investor_attacks_commvault/
[20] https://www.theregister.com/2023/01/10/salesforce_comment/
[21] https://whitepapers.theregister.com/
"improve operating margins"
Operations. Those things that are done by people. People who cost a salary - generally more the better they are, or so goes the theory.
So improving operating margins by firing people means that you'll have less people to do the same job - or more. That's a situation that generally sours the workplace and drives people away, thus improving operating margins even more - except that you get to the point where you don't have enough people to ensure operations (eh, Musk ?).