Activist investor Elliott Management Corp. has made a multibillion-dollar investment in CRM powerhouse Salesforce Inc., setting off a high stakes power play with Salesforce co-founder and co-chief executive Marc Benioff.
"We believe Elliott can push for a board seat and really focus on expanding margins above 25 per cent and improved profits for CRM going forward," said Daniel Ives, managing director and senior equity analyst covering the technology sector at Wedbush Securities, in an email to CRN.
"The walls are closing on Benioff after a Cinderella ride the last decade and investors are frustrated. It's ripe for activism with nothing off the table."
Elliott Management managing partner Jesse Cohn, who has played a role in a number of technology company makeovers, told CRN in an email that Elliott is looking forward to "working constructively with Salesforce to realize the value befitting a company of its stature."
"Salesforce is one of the preeminent software companies in the world, and having followed the company for nearly two decades, we have developed a deep respect for (Salesforce co-founder and co-chief Executive) Marc Benioff and what he has built," said Cohn.
CRN has contacted Salesforce for comment.
More layoffs ahead?
Salesforce shares, which had a 52-week high of $234.49, were up four per cent or $5.60 to $156.85 in mid-morning trading.
Its shares lost 48 per cent of their value in 2022, dropping from $255.01 per share at the start of trading on January 3, 2022, and closing at $132.59 on December 30, 2022. That cut the cloud software company's total market value from $250.3bn at the start of the year to $132.6bn by year's end.
Elliott has made numerous investments in technology companies that have resulted in a turnover in management and layoffs. Most recently, Elliott took a multibillion-dollar stake in Citrix, which was combined with Tibco with the resulting company trimming 15 per cent of its workforce earlier this year. That cut took place after Tom Krause was hired as the CEO of the combined company last year.
The Elliott investment comes after Salesforce said earlier this month it would cut 7,000 employees or ten per cent of its workforce. It also comes with Salesforce co-CEO Bret Taylor due to step down on January 31, leaving co-founder Marc Benioff as sole CEO. Taylor spent about a year in the co-CEO role.
"The environment remains challenging and our customers are taking a more measured approach to their purchasing decisions," Benioff said in a Securities and Exchange Commission filing earlier this year.
Bob Venero, the CEO of Future Tech Enterprise, Fort Lauderdale, Fla., which uses Salesforce but does not resell it, said he expects the vendor to be under pressure to make cuts or even significant changes to its business model.
"Anytime you have someone like Elliott Management take a stake in a company like this you are going to see them push for changes with potential layoffs and structural changes," he said.
"Leadership tends to lose control when you see this kind of activist investor get involved. It's going to be a major change for Benioff. He's going to have to adjust the company based on the changes Elliott is looking for."
Venero said he sees the massive number of layoffs from big tech companies as one public company after another moving to increase their share price by cutting costs.
"The easiest way to cut costs is to lay off people," he said. "Right now there are a lot of me-too companies that are doing layoffs. Once the first big layoff came then one company after another implemented layoffs. In my opinion it's companies jumping on the layoff bandwagon."