Salesforce CEO Marc Benioff is surrounded by activist investors who have stakes in his company. They are trying to force him to make changes.
Analysts suggest that Benioff could be forced to spinoff Slack or sell it . One analyst estimated that while this move could help Salesforce focus its core priorities, it would also likely result in billions of dollars of losses.
Rishi Jaluria, RBC’s chief economist, offered an insightful perspective in a Thursday research paper. He suggested that Salesforce could unwind its largest and most disappointing acquisitions. Jaluria wrote that Salesforce had been too focused on ’empire building” for too long.
Jaluria stated that he did not know of Salesforce’s plans but said “we wouldn’t be surprised if a Slack or MuleSoft divestiture was on our table.” Tableau was also “a disappointment”, but it seems less likely than other companies to divest because Tableau is now embedded in some of Salesforce’s most important products.
$12 billion versus $28 trillion
According to Jaluria’s calculations, spinning off Slack could be like lifting a huge weight off Salesforce’s shoulders. It could boost the stock by as high as 27%
Slack is valued at $12 billion in its current post-pandemic condition. Salesforce could make $9 billion if it spun off 80% and kept 20% of the business. Jaluria would love to see this money used to buy back shares and boost stock earnings.
Selling Slack has its downsides. This move will end Benioff’s long-standing strategy of taking down arch rival Microsoft by directly challenging its Microsoft Office empire. He also bought Quip, which challenges Microsoft Documents and Slack, which challenges Teams.
Salesforce would also lose billions if it sold Slack for that price. In an acquisition which closed 18 months back, it paid $27.7billion.
Salesforce and Jaluria didn’t immediately respond to a request of comment.
Fearsome activist investors are under siege
Benioff is under siege. We mean that he has several activist investors. Salesforce said Friday it had granted one activist a seat on its board: Mason Morfit (CEO and Chief Investment Officer at ValueAct Capital). After ValueAct acquired a stake in Microsoft, Morfit was elected to a seat on the board of Microsoft in 2014. Steve Ballmer was forced to resign.
There’s also Jeff Ubben’s Inclusive Capital which has a Salesforce role. Ubben has been talking with Benioff, CNBC reports. Ubben worked previously at ValueAct, where he was involved deeply and effectively in the Microsoft situation. In 2020, he left ValueAct to start his new company. CNBC was told by a source that Ubben has more than 1.5million shares in Salesforce.
The fearsome Elliott Management is apparently doing more than just circling. According to a source, it has taken a multibillion-dollar stake in Salesforce. Insider was told by the firm that it will seek out changes that increase Salesforce’s value. Lauren Thomas of the Wall Street Journal reported that it is preparing its own slate to fill the nomination period, which opens in February.
All this is due to Starboard Value’s involvement. Starboard Value disclosed a large stake in October. Salesforce started laying off employees shortly after the disclosure. Salesforce stated that it would reduce 10% of its workforce. However, sources told Insider that the company could double that number by the time it has completed rolling layoffs.
Salesforce has added Morfit to its board. It also appointed Arnold Donald, former Carnival Corporation CEO, and Sachin Mehra Mastercard CFO, as well as two other board members, Sanford Robertson (and Alan Hassenfeld) who are retiring. Bret Taylor, co-CEO of the board, also announced his resignation last month.