Elliott Management has scrapped plans to nominate directors to the board of Salesforce after the software group delivered a better than expected earnings report in March and promised to focus on profits.
In a joint statement released on Monday, Elliott said it would not nominate rival directors to the Salesforce board at its upcoming annual meeting since it had put a “clear focus on value creation”.
Jesse Cohn, managing partner of Elliott, said he was “deeply impressed” by Salesforce’s “commitment to profitable growth, responsible capital return and an ambitious shareholder value creation plan”.
The announcement represents a rare retreat for the activist investor while relieving pressure on Salesforce co-founder and chief executive officer Marc Benioff, who was forced to reassess the company’s strategy. However, it does not represent a formal agreement between the two sides and there is nothing preventing Elliott from nominating directors in the future.
Benioff said he was “grateful for Jesse’s mindful and constructive ideas. I look forward to continuing my relationship with Jesse and the Elliott team.”
Elliott said in January that it had acquired a multibillion-dollar position in Salesforce, joining fellow activists such as Starboard Value and ValueAct Act Capital, all of whom have been pushing for the company to improve its profitability.
The group of activists have been critical of Salesforce’s spending and dealmaking, including the takeovers of data analytics group Tableau and workplace app Slack, bought for $28bn in December 2020 at the height of the pandemic boom for tech companies.
Salesforce’s share price fell about 40 per cent from a pandemic peak but has recovered some losses this year after its strong performance in the fourth quarter and commitment from Benioff to make operating margins its “north star”.
The San Francisco-based software group posted fourth-quarter revenues of $8.4bn, against expectations of $7.99bn, and higher than expected adjusted margins of 22.5 per cent. Benioff also said he expected adjusted margins would hit 27 per cent in 2024, ahead of its original forecast to meet that mark in 2026.
Benioff has sought to stay one step ahead of the activists, cutting the company’s workforce by 10 per cent in January and nominating three new directors to its board in late January, including ValueAct’s Mason Morfit.
Elliott also nominated several directors to Salesforce’s board ahead of its results at the beginning of March, as part of an effort to force further concessions.
Source: Financial Times
