Activist Elliott is taking a multibillion-dollar stake in Salesforce

(Bloomberg) — Hedge fund Elliott Investment Management has taken a significant activist stake in Salesforce Inc., following layoffs and a deep stock loss in the enterprise software giant.

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“Salesforce is one of the most prominent software companies in the world, and having followed the company for nearly two decades, we have a deep respect for Marc Benioff and what he has built,” said Jesse Cohn, Elliott’s managing partner. CEO and Chairman of the company. “We look forward to working constructively with Salesforce to realize the value this company deserves.”

Elliott’s holdings are worth billions of dollars, said a person familiar with the matter, who spoke on condition of anonymity because the details are confidential. San Francisco-based Salesforce’s market capitalization was $151 billion at Friday’s close, down from a peak of more than $300 billion in 2021.

The move by Paul Singer’s Elliott, which often drives strategic changes and seeks board representation, comes after half a decade of rapid hiring and big acquisitions, including the 2021 purchase of Slack, to boost profits and shareholder returns. Increases activist pressure on Salesforce. 27.7 billion dollars. Salesforce said this month it was reducing its real estate footprint and laying off 10% of its workforce, which has almost tripled in the past four years.

Shares of Salesforce rose about 1.7% in early trading in New York on Monday. Mizuho analyst Jordan Klein wrote in a note that Elliott’s words of support for Benioff allayed investor fears that the recent departure of top company executives would give Benioff the freedom to make sharp acquisitions. Elliott’s track record of increasing equity returns also helps boost the stock’s appeal.

Benioff said earlier this month that customers are taking a “more measured approach to purchasing decisions” and noted that the economic “environment remains challenging.” In the third quarter, Salesforce’s revenue rose 14% from a year earlier to $7.84 billion, but that was a sharp slowdown from the growth rate a year ago, and analysts expect fourth-quarter sales growth of just 9%.

Elliott’s stake in Salesforce comes at a time when overall activity is picking up again in some sectors globally. The 177 activist campaigns announced worldwide last quarter were the most since 2018, according to Bloomberg data. Among the most high-profile corporations targeted by Salesforce activists is Walt Disney Co. and joins Bayer AG. Elliott’s statement, first reported by The Wall Street Journal, did not disclose details of the investment. Salesforce declined to comment.

Paul Singer’s Elliott grossed a record $13 billion last year

Investors are increasingly critical of the customer relationship management firm’s sales and marketing spending, which is as popular as the annual Dreamforce bash in San Francisco. According to a Bloomberg Intelligence analysis, Salesforce’s costs as a share of revenue are Adobe Inc.’s. or significantly higher than peers such as Microsoft Corp.

Elliott, who has been involved in turnarounds at technology companies from PayPal Holdings Inc. to Pinterest Inc. to Western Digital Corp., is the second prominent activist investor to enter the stock in recent months. Starboard Value bought a stake in the company in October, saying it was having trouble turning growth into profitability.

“It’s not a surprise to us,” said Bloomberg Intelligence analyst Anurag Rana of Elliott’s move. “Salesforce’s valuation plummeted after announcing the Slack acquisition, and since then we’ve seen sales slow and several executive departures.”

Salesforce CEO Bret Taylor announced last year that he would be leaving the company to return to entrepreneurship. If Benioff were ever to step aside at Salesforce, Taylor seemed like the obvious choice.

“It is now trading well below pre-pandemic levels,” Rana said. “Elliott’s involvement can help management focus on both organic sales growth and margin expansion. We won’t be surprised if there is a change at the top, as Microsoft experienced in 2013.

–With help from Tom Giles.

(In the fifth paragraph, he updates the shares and adds an analytical comment.)

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