Elliott Management Buys Stake in Salesforce to Help ‘Realize the Value’

Notoriously aggressive hedge fund Elliott Management joined a group of activist investors targeting the CRM software provider Salesforce, which recently shed a large portion of its workforce.

Elliott, an activist investor well known in the technology sector, has made a “multibillion-dollar investment” in Salesforce. The Wall Street Journal first reported the news, citing people familiar with the matter. For Salesforce, which is axing 7,000 jobs through a new restructuring plan and is saying goodbye to co-CEO Bret Taylor, the news represents another interesting turn in an action-packed three months.

The hedge fund has earned a reputation for pushing its portfolio companies toward drastic changes to increase shareholder value.

“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,” Elliot managing partner Jesse Cohn wrote on Twitter. “We look forward to working constructively with Salesforce to realize the value befitting a company of its stature,” Cohn said.

An Ambitious Player

Elliott Management sports a resumé of advocating for spinoffs, executive shakeups and other dramatic changes in its portfolio changes. It used its 2.2% stake in EMC to push for the storage provider to spin off VMware and Pivotal. It urged Juniper Networks to implement major cost reductions.

Elliott’s Jesse Cohn

It invested $3.2 billion in AT&T in 2019 and soon after ripped the company in a blistering letter for its unsuccessful attempts to buy T-Mobile and successful attempt to buy DirecTV. After Elliott sold its AT&T stake in 2020, Cohn credited the letter for AT&T’s $43 billion divestment of its media business.

Elliott also more recently successful advocated for the ousting of Twitter founder Jack Dorsey from his CEO position.

Elliot was holding than $55 billion in assets under management as of June, according to the Wall Street Journal.

Salesforce

Salesforce in early January announced plans to cuts its 73,000-plus workforce by 10%. Many managers reported that the cuts, which Salesforce said they would disclose to impacted employees, came as a blindside. The company had already gone through a layoff round in October and implemented a hiring freeze.

Chairman and co-CEO Marc Benioff said the reduction stemmed partly from overhiring during the pandemic. He also pointed to decreasing customer spending.

Salesforce has not responded publicly to the news of the Elliott investment.

Other Investors

Elliott’s name provides serious headline fodder, but other activist investors are also testing the waters with Salesforce.

CNBC reported on Monday that hedge fund Inclusive Capital bought a stake in Salesforce. In addition, Starboard Value LP in October disclosed that it purchased a stake in Salesforce.

Omdia’s Mark Beccue

Starboard  stated that shareholders in recent years have not benefitted from Salesforce’s “strong market position.” It argued that Salesforce’s 18.7% operating margins in 2021 fell below that of its peers like Oracle (46.9%), Microsoft (46.8%) and Adobe (46%).

Omdia’s Mark Beccue noted to Channel Futures earlier this month that Salesforce is performing above sector in gross profit margin.

“I’m not a financial analyst, but the push for better margins from a top-performing margin player is sort of ridiculous,” Beccue said. “While there might be some market softness coming, I think Salesforce is well positioned to continue their success because they offer a route of automation. The cutbacks, according to Benioff, are to address margins.”