by Salesforce co-founder and CEO Marc Benioff just threw an already hot potato back at five hungry activist investors.
The tech giant beat Wall Street’s earnings estimates to offer surprisingly strong full-year earnings guidance after its close on Wednesday, as reported by Yahoo Finance’s Allie Garfinkle. The company also unveiled a new $20 billion share buyback plan and told investors it had “dissolved” its internal M&A committee, an important signal to investors pushing for tighter spending.
Shares rose 16% in after-hours trading, and Salesforce’s ticker page skyrocketed onto the most visited list on the Yahoo Finance platform.
“We hit the hyper-space button,” Benioff told Yahoo Finance, referring to initiatives to move faster and improve profitability.
The barrage of ostensibly positive earnings news goes against the narrative of activist investors and executives leaving that has descended on Salesforce in recent months.
Co-CEO Bret Taylor is no longer co-CEO of Salesforce — instead, he’s going to launch an AI startup, the serial entrepreneur told Yahoo Finance. Slack founder Stewart Butterfield, who stayed on when the company was acquired by Salesforce, is still a founder, but no longer with the parent company.
The firm is also gazing down the barrel of five activist money management sharks: Elliott Management, Starboard Value, Inclusive Capital, ValueAct and Third Point.
[Read More: Salesforce’s activist investors: Who are they, and what do they want?]
This is an unprecedented battle between activists and public companies, pros tell Yahoo Finance. Sources have told Yahoo Finance that the action group is clamoring for much better profit margins, a halt to acquisitions and a succession plan for Benioff as CEO.
A source familiar with Elliott’s thinking says Yahoo Finance’s discussions with Salesforce have been “intense” and no settlement has been reached. Elliott plans to nominate several people to the Salesforce board of directors and would like further cost savings, the source said.
“Salesforce’s series of announcements today represent progress toward regaining investor confidence. Accelerating margin targets, commitment to responsible capital return priorities, establishment of a corporate transformation committee and dissolution of the M&A committee are necessary steps forward. These steps are consistent with our recommendations, and we believe they will help restore value to Salesforce,” Elliott said in a statement late Wednesday.
It’s unclear whether Salesforce’s new overtures to activists — such as its increased buyback plan, calls for new cost-cutting efforts by partnering with Bain, a promise of a 27% operating margin by 2023 (and 30% by 1Q24) and pulling back on M&A — will satisfy the group.
Benioff did not indicate whether a solution with the activists was near. However, Elliott’s statement suggests that more work needs to be done.
Benioff added that major acquisitions are likely off the table in the near future.
“Shareholders are now part of the Ohana with a significant growth + profitability advantage,” said Citi analyst Tyler Radke.
Brian Sozzi is the editor-in-chief of Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and further LinkedIn.
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