Salesforce Is Being Tested As Its Growth Slows Down
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Salesforce Inc. has gone through a difficult period in recent months as slowing growth and turmoil among employees have dampened enthusiasm for its business.
Changes in management and employment
In November, Salesforce said co-CEO Bret Taylor was leaving - a departure that came after growing tension with co-founder and co-founder Mark Benioff over their responsibilities and the way they run the company, the daily reported. Prior to Salesforce's announcement that Taylor would be leaving, there was discussion about resolving the issue and arranging Taylor's stay for another year, but this fell through. Rising tensions eventually led to Salesforce's announcement that Taylor would be leaving his position as co-CEO on January 31, and Benioff would once again become sole leader and continue as president of the company.
Subsequently, Slack's chief product officer and another director, senior vice president of marketing communications and brand, also leave, though he described it as a coincidence. Salesforce has announced the departure of Stewart Butterfield, CEO of Slack, a workplace communication tool Salesforce acquired in 2021. The Slack acquisition, nearly twice the size of Salesforce's next largest acquisition, was an attempt to move Salesforce beyond its core product, which helps businesses manage customer relationships, to providing software tools that businesses need on a daily basis. The news of Butterfield's departure comes after Salesforce said last week that CEO Bret Taylor would leave the company in January. Butterfield said he was leaving the company in good shape. A spokeswoman said Mr Butterfield will be succeeded by Lidiane Jones, the current cloud director at Salesforce, as the next CEO of Slack.
This month, Salesforce said it would cut its workforce of around 80,000 by 10% - the largest round of layoffs to date.
Other company problems
While tech companies have struggled with slowdowns in recent quarters, Salesforce has been hit harder than many of its peers in the business software industry.
Its shares have lost nearly 30% over the past year, worse than rivals. In its financial report for the third fiscal quarter for the three months to October 31, Salesforce missed analysts' expectations regarding billing.
Salesforce reported revenue for the fiscal third quarter ended Oct. 31 of $7.84 billion, up 14% from the prior year. This marked a sharp slowdown from 27% revenue growth in the same quarter a year earlier. The company also declined to issue guidelines for the 2024 tax year.
The company's costs increased with the number of its employees. It added close to 30,000 employees from the beginning of 2020 to the end of last year, an increase of around 60%. Salesforce had nearly 80,000 employees worldwide as of October 31, up from over 49,000 as of January 31, 2020.
In a tightened financial environment, customers have become more careful with their spending, which takes them longer and requires additional approvals before they agree to purchase Salesforce software.
New inwestor
On Sunday, The Wall Street Journal reported that Elliott Management Corp. invested a multi-billion dollar investment in the company. In October, Starboard Value LP reported that it had acquired a stake in the company. While campaign details could not be known, Elliott, one of the country's largest and most prolific activists, often seeks board representation and pressures companies to make operational improvements and other changes.
Elliott has not publicly stated his specific hopes for Salesforce.
Analysts said the company's new activist investor will continue to focus on what the company can do to better streamline operations in these challenging times.
Saleforce share price
Salesforce's stock, which has performed brilliantly for years, has fallen by about half from its highs at the end of 2021 and has given the company a market capitalization of around $150 billion. Salesforce shares were up about 3% on Monday afternoon. Thus, the prices reached the level of 155.87.
Source: wsj.com, finance.yahoo.com
