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Salesforce's activist investors: Who are they, and what do they want?

Alexandra Garfinkle · Senior Reporter
Updated 7 min read

In This Article:

As it gears up to report earnings today after the bell, Salesforce (CRM) has no less than five activists circling it, turning up the heat on the software firm's founder and CEO Marc Benioff to cut expenses, boost earnings and even execute a better succession plan.

Why? Well, for one thing, the cloud-based software company's stock is down about 21% over the last twelve months (up around 22% year-to-date).

"It's been a long conversation around what Salesforce margins could be," said Wells Fargo analyst Michael Turrin. "Now, it's become more pronounced over the last three to five years because we've seen other businesses achieve different margin structures. Though Salesforce has transitioned management team members over time and they've shown signs of becoming a mature company, the intensity of the [cost-cutting] conversation has certainly picked up."

Last quarter, Salesforce said that its Q3 GAAP operating margin was about 5.9%, while competitor Oracle's (ORCL) latest GAAP operating margin was 25%. The company also laid off about 10% of its staff in January, a sea change after years of talking about Salesforce as "a family."

Here's what Wall Street's expecting to see from Salesforce's key metrics today, as compiled by Bloomberg:

Q4 2023 revenue: $8 billion expected versus $7.33 billion actual in Q4 2022

Q4 2023 adjusted earnings per share (EPS): $1.37 expected versus $0.84 in Q4 2022

Q4 2023 adjusted operating margin: 22.4% expected versus 15% in Q4 2022

Even if these numbers hold – and the non-GAAP numbers look even dicier – it's going to be a tough day for Salesforce: they're ultimately anticipated to report their slowest-ever quarterly revenue growth.

Who are the so-called activists?

So far, the list – and it always seems to grow – is Third Point, ValueAct, Inclusive Capital, Elliott Management, and Starboard Value. The latest addition: "anti-woke" Strive Asset Management.

Said Jeff Gramm, Bandera Partners portfolio manager: "Though we likely won't see these activists working together expressly, but implicitly dynamics will be set up...certainly a good cop, bad cop dynamic could develop.” Gramm noted hat ValueAct is less aggressive and less likely to launch a proxy fight than, say, Starboard and Third Point.

The bottom line: this is a giant pain in the neck for Benioff at best, existential at worst.

Here's a quick look at each firm circling Salesforce—and what they may want:

Third Point

Third Point, led by billionaire investor Dan Loeb, has picked a number of high-profile fights over the years notably Disney (DIS), Campbell Soup (CPB), and Shell (SHEL). In 2020, Loeb took a stake in Intel (INTC), launching a campaign that would lead to Pat Gelsinger’s rise to the chipmaker’s CEO role – and the ousting of Bob Swan. The size of Third Point’s stake and the full scale of its intentions at Salesforce haven't been confirmed, but Loeb's capable of launching a fearsome proxy fight. In other words: he's not in the stock for a free ticket to the company's Dreamforce events.

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