Salesforce Leaps On Possible Board Changes Following Activist Stake

Salesforce is said to be mulling big board changes following news that activists have taken stakes in the enterprise software group.

Salesforce  (CRM) – Get Free Report shares jumped higher Thursday following reports that it’s set to add new members to its board of directors just days after it was revealed that activist investor Elliott Management has taken a stake in the world’s biggest enterprise software group.

Bloomberg reported Thursday that Salesforce may add Mastercard  (MA) – Get Free Report CFO Sachin Mehra to its board, following weekend comments from Elliott Management that indicated it’s “looking forward to working with Salesforce to realize the value benefiting a company of its stature”. Elliott did not, at the time, indicate whether it would seek a seat on the company’s board of directors or push for specific changes.

Starboard Value, another activist group lead by Jeffrey Smith, built a stake in Salesforce last fall and urged management to be “as competitive at producing value for shareholders” as they were in the market for business software. 

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JMP Securities analyst Patrick Walravens argued that “stockholder activism may prove a catalyst for positive changes, including a refresh of the board of directors,” noting that all thirteen members of its board are up for re-election later this year.

“Going forward we think Salesforce could benefit from an even greater focus on performance-based equity awards and an even greater reduction or elimination of time-based equity awards for senior management, said Walravens, who carries a ‘market outperform’ rating with a $250 price target on the stock.

Salesforce shares were marked 3.2% higher in Thursday afternoon trading following reports of the board additions to indicate an opening bell price of $161.01 each. 

Earlier this month, unveiled plans to cut around 10% of its global workforce amid a restructuring strategy under stand-alone CEO Marc Benioff. Salesforce said the job cuts, as well as the broader restructuring plans,, will cost between $1.4 billion and $2.1 billion, with a hit of around $1 billion expected over its fiscal fourth quarter.

Benioff was left as stand-alone CEO of the San Francisco-based group after Bret Taylor said he would leave the company to pursue other interests just a year after becoming co-CEO.

Taylor’s departure cast a pall over an otherwise solid third quarter earnings release for Salesforce, which reported a Street-beating bottom line of $1.40 per share as demand for its work-flow solutions remained solid. Group revenues, Salesforce said, rose 14% from last year to $7.84 billion, essentially matching analysts’ estimates.

The group’s remaining performance obligation, or RPO, a tally of its total deferred revenue and product backlog and a key industry metric, rose 11% from last year to $20.9 billion.

Salesforce repeated its forecast for full-year revenues in the region of $30.9 to $31.00 billion with non-GAAP earnings are expected to come in between $4.92 to $4.94 per share, a 19 cent bump from its August forecast.

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