Salesforce jumps on report activist Starboard has taken stake (update)

Takako Hatayama-Phillips

Update 9:20am: Updates shares, adds Salesforce comment.

Salesforce (NYSE:CRM) rose 5.4% in premarket trading on a report that activist Starboard Value has taken a "significant" stake in the company.

Starboard Value head Jeff Smith will outline his thesis on Salesforce (CRM) at the 13D Monitor Active-Passive Investor conference in NYC on Tuesday, according to CNBC's David Faber. Faber didn't say the specific amount of stake or dollar amount. Salesforce has a market cap of $142 billion.

Smith will focus on driving higher incremental margins and he will say that Salesforce's (CRM) valuation discount to its peers is due to the company's "subpar" mix of growth and profitability, according to Faber. He will also argue that the company hasn't generated "meaningful operational leverage" relative to its peers in recent years. Smith also believes that Salesforce (CRM) long-term targets are "less ambitious" than peers.

"The incremental margins are nowhere near their peers," Smith said in an interview with CNBC.

Salesforce (CRM) responded in a statement emailed to Seeking Alpha.

"We are committed to acting in the best interests of our shareholders and are focused on continuing to execute on our strategy outlined at Dreamforce," Salesforce said in the statement.

Salesforce (CRM) didn't immediately respond to Seeking Alpha request for comment.

Smith is scheduled to be on CNBC in the 10a.m. hour to talk about what he discussed at the activist conference.

Smith will also discuss Splunk (SPLK) at the activist conference, which was reported by Reuters and WSJ on Monday. Starboard has taken a stake of just under 5% in Splunk.

Comments

[CJlove4all]

Shouldn't this drop below $100 if they miss another 2 quarters' numbers/lower guidance due to 'whatever" excuse?

5x sales today should be 2.5 x sales???

[cpraderas]

Maybe the new activist shareholder is going to squeeze some of wokeness out of the company. Go woke go broke… but in the opposite direction

[Shangrila Value]

Oh oh. Big layoffs are coming.

[SuperPac]

''Smith will focus on driving higher incremental margins and he will say that Salesforce's (CRM) valuation discount to its peers is due to the company's "subpar" mix of growth and profitability, according to Faber. He will also argue that the company hasn't generated "meaningful operational leverage" relative to its peers in recent years. Smith also believes that Salesforce (CRM) long-term targets are "less ambitious" than peers.''
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I don't know much about Starboard or Smith...but I agree with everything, literally everything, that Smith / Starboard have to say here. Especially on margins and the ability to price up.

I think it's time for Benioff to either change tack or leave. I think he would be wise to accept the guidance and drive of Smith / Starboard.

[Karl Kelly]

@SuperPac I agree with you. I normally don’t like activist investors. But sales force needs to change and their ceo has shown he can’t change in his own.

[SuperPac]

@Karl Kelly Paypal - same. They need some ''activist'' investor.

[Karl Kelly]

@SuperPac Agreed, they are chasing rainbows in the old sense of the word. Which in the end leaves us with nothing.

[mosky moc]

i hear CRM is actively outsourcing a lot of their support jobs to india

[Shangrila Value]

@mosky moc everyone is doing it.

[vireoman]

@mosky moc It's okay to hire foreigners at lower wages as long as they remain in their home country. What isn't okay is for foreigners to find asylum in this country, be paid lower wages, and then pay taxes on those wages.

[joeharv68]

maybe woke CEO Marc Benioff should pull out of conservative states, that would really boost shareholder value.

[vireoman]

@joeharv68 As businesses that are domiciled in those red states find CRM software as invaluable in their pursuit of boosting shareholder value, I predict that Mr Benioff's alleged excess of the dreaded 'wokeness' won't prove to be a problem.

[Shinaberow]

Salesforce is doing good.
The management team is doing good.
There is no problem with long-rerm strategies and positioning.
We do not need stupid activists to pressure for SHORT-TERM margin improvement, take the profit then leave after fucking up the company for long-term.
I am going to vote NO for any board member nomination from Starboard Value for sure.
Get the fuck out and play your game elsewhere.

[JB170]

@Shinaberow i agree on the overall statement but their Profit Margins should be much higher, their current margins are literally ridiculous, stock based comp is really hurting their bottom line as they are growing it along with revenue, i believe some dicipline in this age would be great for them as other companies (google,Apple,etc) are all tightening their belts, so employees can't as easily treathen to leave elsewhere for better comp. just tightening that will literally free up billions in profit.

[Just the Millionaire next door]

Even being down -49% last 12 months stock still up 295% last 10 years.

[User18]

@Just the Millionaire next door wish I sold when it hit $300 though..

[Just the Millionaire next door]

@User18 Sold mine earlier this year at 180.

[bill h illify]

We shall see…margin improvement pressure coming?

[msawi11]

@bill h illify CRM needs to fire lots of employees

[mantles]

@msawi11 who do they need to fire and why?

[msawi11]

@mantles very bloated employee rolls. I have friends who work at CRM and tell me all.