Salesforce’s Marc Benioff pledges to put profits first amid activist showdown

Salesforce co-founder and chief executive Marc Benioff said the company was moving quickly to “reassess” its strategy and focus on profits as it faced mounting pressure from activist investors.

In a bullish call on a better-than-expected earnings report, Benioff told analysts on Wednesday: “We’ve been pushing the hyperspace button since our last conversation a quarter ago. Changes that took months take weeks. Salesforce shares held on to after-hours gains and rose more than 15% in premarket trading on Thursday.

Salesforce has faced an onslaught from activist investors in recent months after its stock price fell more than 45% from its coronavirus pandemic peak. Many of these activists criticized his deals and spending.

Benioff’s preference for growth over higher profits has also come under scrutiny, as have his takeovers of data analytics groups Tableau and Slack, the workplace chat app which it bought at the height of the pandemic for $28 billion.

Benioff raised 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 that adjusted margins would hit 27% in 2024, ahead of his original forecast of hitting that mark in 2026.

“We’ve never focused on efficiency in the business before because we’ve had 24 years of growth, growth, growth. . . we are looking at this moment to re-evaluate,” Benioff said.

The call came after the workplace software company posted fourth-quarter revenue of $8.4 billion, against expectations of $7.99 billion, and higher adjusted margins. than expected by 22.5%.

The results give Benioff some breathing room as he takes on at least five activists — Elliott Management, Starboard Value, ValueAct Capital, Inclusive Capital Partners and Third Point Management — who are pushing for a company overhaul.

Ahead of Wednesday’s results, Elliott named a slate of directors to the Salesforce board, increasing pressure on the company.

The activist hedge fund proposed its nominees after “constructive but intense” discussions with the company, a person familiar with the matter said. It’s unclear how many people Elliott plans to name or who they are.

The hedge fund, which has earned a reputation as one of Wall Street’s most aggressive activists, was not focused on a settlement and viewed the appointments as applying “maximum pressure,” the person said.

San Francisco-based Salesforce made other concessions: appointing three new directors to its board at the end of January, including ValueAct chief executive Mason Morfit, who is also an investor, and announcing that it would cut approximately 10% of its workforce, which has approximately 8,000 employees.

During Wednesday’s call, the company revealed it was disbanding its mergers and acquisitions committee. As it focused on profitability, the company said it was no longer aiming to hit $50 billion in annual revenue by 2026, citing “the uncertain macro and monetary environment.”

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