Salesforce’s Marc Benioff vows to put profits first amid activist standoff

Salesforce co-founder and CEO Marc Benioff said the company is moving quickly to “reassess” its strategy and focus on earnings as it faces increasing pressure from activist investors.

On a bull call following a better-than-expected earnings report, Benioff on Wednesday told analysts, “We’ve been hitting the hyperspace button since we last spoke a quarter ago. Changes that used to take months take weeks.” Salesforce shares extended gains in after-hours trading and rose more than 15 percent in pre-market trading Thursday.

Salesforce has faced an onslaught from activist investors in recent months, after its share price plunged more than 45 percent from the height of the coronavirus pandemic. Many of these activists criticized deal-making and spending.

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

Benioff addressed those concerns on Wednesday’s analyst call, saying “profitability is really our number one strategy,” and calling operating margins the company’s “north star.” It expected adjusted margins to reach 27 percent in 2024, ahead of its original forecast of meeting that number in 2026.

“We’ve never had such an efficiency focus in a company before because we’ve had 24 years of growth and growth and growth . . . We’re looking forward to this moment to reassess,” Benioff said.

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

The findings give Benioff some breathing space as he competes with at least five activists — Elliott Management, Starboard Value, ValueAct Capital, Inclusive Capital Partners and Third Point Management — who are pushing for change in the company.

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

The activist hedge fund put forward its nominees after “constructive but extensive” talks with the company, said a person familiar with the matter. It is not known how many people Elliott plans to nominate or who they are.

The source said the hedge fund, which has earned a reputation as one of the most aggressive activists on Wall Street, was not focused on settling and saw the nominations as applying “maximum pressure.”

San Francisco-based Salesforce made other concessions: It nominated three new directors to its board in late January, including Mason Morfit, CEO of ValueAct, also an investor, and announced it would cut about 10 percent of its workforce, up to About 8,000 employees.

The company revealed in a call Wednesday that it will be dissolving the Mergers and Acquisitions Committee. While the company focused on profitability, it said it no longer aims to reach $50 billion in annual revenue by 2026, citing an “uncertain currency and currency environment.”