“Activism is clearly now circling the Salesforce name in droves … creating a ‘perfect storm’ for CEO Marc Benioff,” said Wedbush analyst Dan Ives.
Salesforce (CRM) – Get Free Report shares moved higher Thursday amid reports that a fifth activist investor, Dan Loeb’s Third Point Hedge fund, has taken a stake in the world’s biggest enterprise software group.
The Wall Street Journal reported Third Point’s stake late Wednesday, which adds to positions taken by Elliott Management, ValueAct Capital and Inclusive Capital Partners
Starboard Value, another activist group lead by Jeffrey Smith, built a stake in Salesforce last fall and urged management to be “as competitive at producing value for shareholders” as they were in the market for business software.
The renewed activist interest follows a recently-unveiled strategy from CEO Marc Benioff earlier this year to boost sagging profits at the group, including plans to cut around 10% of its global workforce that will cost between $1.4 billion and $2.1 billion.
Benioff was left as stand-alone CEO of the San Francisco-based group after Bret Taylor said he would leave the company to pursue other interests just a year after becoming co-CEO.
“Activism is clearly now circling the Salesforce name in droves as the massive cloud installed base, free-cash flow potential, under performing margin story, headache Slack deal, and rotating C-level suite has created the perfect storm for Benioff,” said Wedbush analyst Dan Ives, who carries an ‘outperform’ rating with a $200 price target on the stock.
“Ultimately we view this all as a much needed positive for the story to put pressure on under performing assets and strategically look at possible spin-offs over the next 6-12 months depending on outside strategic interests as well as further cost cuts,” he added.
Salesforce shares were marked 1.11% higher in pre-market trading Thursday to indicate an opening bell price of $171.52 each.
In an effort to placate concerns raised by ValueAct, Salesforce agreed to put CEO Mason Morfit on the board, alongside the newly-appointed Mastercard MA CFO Sachin Mehra, starting on March 1
Co-CEO Taylor’s departure, however, clouded an otherwise solid third quarter earnings release for Salesforce, which reported a Street-beating bottom line of $1.40 per share as demand for its work-flow solutions remained solid. Group revenues, Salesforce said, rose 14% from last year to $7.84 billion, essentially matching analysts’ estimates.
The group’s remaining performance obligation, or RPO, a tally of its total deferred revenue and product backlog and a key industry metric, rose 11% from last year to $20.9 billion.
Salesforce repeated its forecast for full-year revenues in the region of $30.9 to $31.00 billion with non-GAAP earnings are expected to come in between $4.92 to $4.94 per share, a 19 cent bump from its August forecast.
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This story was originally published February 9, 2023, 7:00 AM.
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