Marc Benioff, co-founder and CEO of Salesforce.com Inc., speaks at the WSJDLive Global Technology Conference in Laguna Beach, California, U.S. on Wednesday, October 26, 2016. The conference brings together an unparalleled group of top CEOs, founders, trailblazers, investors and luminaries to explore emerging technology opportunities around the world.
Patrick T. Fallon | Bloomberg | Getty Images
The turbulence in the upper ranks of Salesforce does not sit well with Wall Street.
On Monday, the company announced the departure of Slack CEO Stewart Butterfield, who joined Salesforce last year in its biggest acquisition ever. Last Wednesday, Salesforce co-CEO Bret Taylor, who orchestrated the Slack deal, said he was leaving — exactly a year after being promoted to share the top job with Marc Benioff.
In the three trading days since the Taylor news landed alongside Salesforce’s third-quarter earnings report, the stock has had two of its three worst days of the year, plunging 8.3 respectively. % and 7.4%. Salesforce has now lost 47% of its value for the year, against the Nasdaq’s 28% drop, and is trading at the lowest since March 2020, the early days of the Covid-19 pandemic.
Taylor, who joined Salesforce in 2016 through the acquisition of his startup Quip, said he “decided to go back to my entrepreneurial roots.” Benioff said on the results call, “We have to let him be free, let him go, and I get it, but I don’t like it.”
Butterfield has made it clear that he is leaving for different reasons.
“I won’t do anything entrepreneurial,” Butterfield wrote in a Slack post that was seen by CNBC. “As trivial as it sounds, I’m definitely going to be spending more time with my family (as well as working on personal projects, focusing on health, and generally spending time on those things that [are] harder to do when running a large organization). »
While Taylor and Butterfield are the most high-profile outings, they’re far from alone among top Salesforce executives.
Last month, Salesforce announced that Gavin Patterson, president and chief strategy officer, would leave in January, and on Thursday Mark Nelson, president and CEO of Salesforce’s Tableau product, tweeted it was his last day.
With Butterfield, Slack loses product manager Tamar Yehoshua and Jonathan Prince, senior vice president of marketing, brand and communications, people familiar with the matter previously told CNBC. Noah Weiss, senior vice president of product at Slack, will succeed Yehoshua, Butterfield said in a Slack post. Butterfield is replaced by Lidiane Jones, executive vice president of Salesforce who joined in 2019.
Salesforce’s three-day dive
“Two Elephants in the Room”
Slack was a pandemic-inspired acquisition. With workers forced to communicate remotely, Slack’s popular chat app has exploded. In a series of tweets on March 25, 2020, Butterfield said the company had seen “early signs of more teams being created and new paying customers like we’ve never seen before,” adding that the shift from email to chat channels, “which we thought was inevitable over 5-7 years, we’ve been accelerated by 18 months.”
Salesforce was so excited about Slack’s expansion that it paid more than $27 billion for the company with a forward price-to-sales ratio of 24, one of the highest multiples ever in software. Taylor’s name was all over the deal, even though he wasn’t co-CEO yet. Taylor contacted Butterfield several times in August and September 2020 about a possible acquisition, and the two negotiated throughout the process, culminating in a deal announced on December 1 of that year, according to a filing with the SEC.
Salesforce’s purchase of Slack closed in July 2021 and its stock peaked four months later at nearly $310. Since then, it has lost 57% of its value, closing Monday at $133.93.
Like its high-value tech counterparts, Salesforce has been hit this year by soaring inflation and rising interest rates, which have pushed investors into parts of the market deemed safer in a downturn. Salesforce results didn’t help. Last week, the company reported third-quarter revenue growth of 14%, the slowest expansion of any period since the company’s IPO in 2004. Its fourth-quarter forecast calls for growth of 8 % to 10%.
In a break from third-quarter tradition, Salesforce neglected to provide guidance for its next fiscal year.
Guggenheim analysts wrote in a report that there were “two elephants in the room.” The first was to omit guidance for the coming year.
“The second elephant in the room is why Bret Taylor has decided to step down as co-CEO and vice-chairman after just one year,” wrote the Guggenheim analysts, who have the equivalent of a sustaining note on the title. Analysts reminded clients that three years ago Keith Block stepped down as co-CEO after 18 months on the job and wrote that “the company appears to have struggled since.”
After Taylor’s announcement last week, Wedbush analysts wrote that “the street will see this as a clash with Taylor one of the pillars of the CRM strategy.”
A Salesforce spokesperson declined to comment beyond reiterating a statement the company sent earlier regarding Butterfield’s departure.
On Thursday, Wolfe Research downgraded Salesforce stock to the equivalent of a hold of a buy. They wrote that the company is entering “a difficult new chapter” after execution errors, big-name departures and slowing revenue growth.
The only day in 2022 when Salesforce stock was hit harder than Thursday or Monday was at the very start of the year. On January 5, UBS downgraded Salesforce and Adobeadvising clients that business technology spending has been pulled forward by the pandemic, which has slowed the continued growth of both companies.
LOOK: Salesforce shares under pressure after co-CEO Bret Taylor resigns
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