Salesforce-Elliott Management tensions heat up with looming board nominations
Activist investor Elliott Management, which recently took a multi-billion dollar position in Salesforce (CRM), is looking for a major overhaul of the company's board, a person familiar with the matter tells Yahoo Finance.
The source said that Elliott may put forth numerous candidates to join the Salesforce board ahead of the nominating window opening on Feb. 12, adding that Elliott is focused on nominating high quality candidates with diversity in mind.
Elliott could be eyeing the removal of long-tenured board members that have worked closely with Salesforce Co-Founder Marc Benioff to build and grow the company — these include Craig Conway (director since 2005), Alan Hassenfeld (director since 2003) and Sanford Robertson (director since 2003).
Salesforce declined to comment to Yahoo Finance on this story.
Earlier on Thursday, Bloomberg reported that Salesforce was looking to nominate several new members to its board amid the pressure from Elliott, notably former Carnival Corp. CEO Arnold Donald.
"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 Marc Benioff and what he has built," Jesse Cohn, Elliott's big-name portfolio manager, said in a statement to Yahoo Finance. "We look forward to working constructively with Salesforce to realize the value befitting a company of its stature."
Elliott joins fellow noted activist investor and Starboard CEO Jeff Smith as having built a position in Salesforce, with Starboard's position being disclosed in October. Activist Jeff Ubben at Inclusive Capital is also reportedly in Salesforce shares.
A source familiar with Starboard's thinking told Yahoo Finance that Salesforce has significantly more room to improve margins — if it wants to get serious about doing so. One way could be to divest recent acquisitions such as Slack, pros have told Yahoo Finance.
Salesforce finds itself on defense with investors arguably for the first time as a public company.
The cloud-based software company is in the process of laying off some 8,000 people amid a drive to bolster lagging profit margins the activists are up in arms about following high-profile deals for Slack, Tableau, and Mulesoft. The company is also executing select real estate exits and office space reductions.
"I’ve been thinking a lot about how we came to this moment," Salesforce co-founder and CEO Marc Benioff said in a letter to employees on the layoffs. "As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we’re now facing, and I take responsibility for that."
The company estimates it will incur $1.4 billion to $2.1 billion in charges related to the actions.
Salesforce has committed to a 25% operating margin by calendar year 2025. If hit, it would mark a notable increase from 2022's goal of 20.4%.
Analysts have generally welcomed the trio of activists to Salesforce in a bid to work the stock higher. But the mood on the Street is that any asset sales would be unwise.
"We also feel that it makes little sense for Salesforce to jump to a divestiture strategy at this stage, and that doing so poses several risks, namely: potential for managerial distraction; overpaying is human, selling for scrap is…not what we advise; future growth could be irreparably compromised," said Sarah Hindlian-Bowler, Macquarie’s head of technology research – Americas.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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