Salesforce steamrolled expectations in its Q4 earnings, posting $8.38BN in revenues – up 14 percent year-over-year.
Its forecast for the next fiscal year also significantly surpassed analyst forecasts, with operating margins expected to reach 27 percent, a record high.
On the news, its shares rose 16 percent – now up 42 percent since the turn of the year.
Reported analyst pressure to cut costs likely helped. Yet, Marc Benioff, CEO of Salesforce, also credited moves to reignite its performance culture, scrutinize every dollar of investment, and prioritize its core innovations.
In doing so, Salesforce is prioritizing profitability over growth, and – through its fixation on this goal – the vendor seems set to disband its M&A committee.
During the earnings call, Benioff stated:
To ensure a high degree of accountability, our board is forming a new business transformation committee, which I have joined, and we have fully expanded our M&A committee as well to reflect our new focus.
The Wall Street Journal stated that this may also suggest some of its past acquisitions “could end up on the block.”
If this is indeed the case, it is perhaps unlikely to be Tableau or MuleSoft – with Tableau in each of Salesforce’s top ten deals last quarter and MuleSoft included in seven.
As such, some may speculate that Slack may well be the acquisition pushed to the side, especially after many of the layoffs cut through its employee base.
Indeed, last month, The Register reported: “There’s no more of Slack left to cut.”
While such extensive cuts may have led to these impressive earnings, they challenge the “ohana” culture at Salesforce.
Moreover, the story below – involving a certain Hollywood actor – may have damaged this further.
McConaughey Drama and Layoffs
Shortly before the earnings results, news emerged that Salesforce pays Matthew McConaughey $10MN annually as a “creative adviser” and “TV consultant.”
Reports suggest this may continue, despite the vendor cutting 8,000 jobs since the new year.
Alongside the layoffs, Salesforce has cut back on monthly off days while funding McConaughey his substantial wage – according to the Wall Street Journal.
McConaughey’s annual $10MN wage consists of cash and equity.
In addition, estimates indicate the actor has received about $160m throughout his working relationship with the CRM stalwart.
While reports suggest that McConaughey is a friend of Marc Benioff, the CEO has denied being part of the deal, which seems set to continue.
Many have taken to social media to take issue with the reported revelation. Here are a couple of examples of such posts.
Salesforce: We can’t save your jobs, not in this economy.
Also Salesforce: Alright, alright, alright Mathew, here are your millions! https://t.co/YfkORlpeWT
— Alphabet Workers Union (AWU-CWA) (@AlphabetWorkers) February 28, 2023
Despite McConaughey’s wage, it seems Salesforce employees will be under more pressure to perform and earn their buck.
One report even suggests that Benioff had discussed the idea of ranking employees by their performance and routinely firing those languishing at the bottom of the leaderboard.
Such news seems a far cry from stories at the start of 2022 when Salesforce had plans to launch a wellness retreat for its employees.
Now, Salesforce has pushed this retreat to the side. Yet, McConaughey’s eyewatering $10MN annual wage reportedly still stands.
Perhaps his council is worth the price tag. Indeed, Twilio saw it fit to recruit George Clooney for an event last year, shortly after laying off 11 percent of its workforce.
Nevertheless, the idea is unlikely to sit well with many dismissed employees – even the specialty baristas Salesforce is scaling back on at its San Francisco skyscraper.
A Chance to Reassess
Ultimately, when activist investors come knocking at the door, they see an opportunity in a mismanaged company.
So, while McConaughey’s wage caused quite the stir, it may be next to bite the dust. If not, Benioff may have to answer some uncomfortable questions – from investors and employees – particularly if he still wishes to band about his “ohana” mantra.
After all, actions speak louder than words.
However, Benioff is likely to have gotten used to responding to those uncomfortable questions in recent months – after engaging in “constructive but intense” conversations with new investors.
Now, the CEO is seizing the chance to reassess. He stated:
We’ve never had an efficiency focus in the company before because we’ve had 24 incredible years where we’ve had to just grow, grow, grow… We’re kind of looking at this moment as: “Hey, we can reassess.” This is an incredible moment.
As such, expect to see much more movement from Salesforce in the coming months, clarifying its go-to-market proposition and pushing forwards its efforts to bolster productivity.
Doing so will likely ease much of the investor pressure – as its earnings exceed the $30 billion annual revenue mark.
However, finding ways to advance these revenues and appease investors without further sacrificing Salesforce’s family values may be Benioff’s greatest challenge yet.
