Changes afoot at Salesforce after activist investor Elliott takes a decisive slice
It is 'never a good sign when Elliott shows up' says analyst of fund manager whose reputation precedes it
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 Citrix, Commvault and Western Digital among its targets in recent years.
It is "never a good sign when Elliott shows up," Constellation Research principal analyst and founder Ray Wang took to Twitter to say in response to the news of Elliott's adopted position among Salesforce investors.
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Salesforce's 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.
The company earlier this month announced 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."
The signs were there in the middle of last year. Speaking to investors following its Q2 results, 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," including spinning out its flash and hard disk businesses following Elliott's acquisition of a $1 billion stake in WD.
Elliott elbowed its way onto the board of Citrix after acquiring a stake in 2015. Following the move, Citrix sold its GoTo business, all but quit the server virtualization, and ditched its Xen brand.
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In 2018, Elliott accused Commvault of "numerous operational issues," "complex licensing, unrealistic quota-setting, ever-changing sales coverage and high employee turnover," after 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 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. ®