Salesforce earnings provide some respite amid activist fight

Salesforce and its founder Marc Benioff have won some respite in their battle with activist investors as better than expected earnings on Wednesday sent its shares up 14 per cent in after-hours trading.

The workplace software company posted fourth-quarter revenues of $8.4bn, against expectations of $7.99bn, and higher than expected adjusted margins of 22.5 per cent.

The results give some breathing room to Benioff as he looks to face down at least five activists — Elliott Management, Starboard Value, ValueAct Capital, Inclusive Capital Partners and Third Point Management — that are pushing for a shake-up at the company.

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

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

Elliott’s latest move shows how it is raising the stakes for Benioff, Salesforce’s co-chief executive, to put forward significant changes for the company. The hedge fund, which has earned a reputation as one of the most aggressive activists on Wall Street, is not focused on a settlement and sees the nominations as applying “maximum pressure”, the person said.

Salesforce has faced the onslaught of activist investors after its share price dropped more than 45 per cent from its coronavirus pandemic peak. Many of those activists have been critical of its dealmaking and spending.

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

The San Francisco-based company tried to fend off criticism by nominating three new directors to its board in late January, including Mason Morfit, the chief executive of activist ValueAct, which is also an investor. Earlier in the year Benioff said the company would cut about 10 per cent of its workforce.

On Wednesday, Salesforce guided that adjusted margins in 2024 would be about 27 per cent, a sign that recent cutbacks at the company will pay dividends.

Investors are expecting Benioff to make significant changes to placate disgruntled shareholders and stave off a proxy fight.

CNBC first reported the nominations. Elliott and Salesforce declined to comment.

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