HomeTechnologyComputingSalesforce’s Benioff On How To Survive A Recession: Customer Relationships, ‘Operational Excellence’

Salesforce’s Benioff On How To Survive A Recession: Customer Relationships, ‘Operational Excellence’

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Wade Tyler Millward

Salesforce has a playbook for “operational discipline and operational excellence, especially in the face of economic headwinds,” co-founder and co-CEO Marc Benioff said during an earnings call this week.

Salesforce leadership is in battle mode after delivering mixed quarter results and the surprise upcoming departure from co-CEO Bret Taylor.

Marc Benioff, co-founder of Salesforce and soon to be sole CEO, promised analysts on the company’s earnings call this week — which covered the third quarter of Salesforce’s fiscal year 2023, a quarter ending Oct. 31 — that he will continue to focus on increasing operating margins.

Remember, Benioff told analysts, San Francisco-based Salesforce, founded in 1999, has already weathered two major recessions: the dot-com crisis of the early 2000s and the Great Recession of the late 2000s.

“We actually developed our own (recession era) playbook,” Benioff said on the call. “We really wrote it all down. We talked about what happened. We knew it would happen again. And we had to dust off some of those plans and numbers from 12, 13 years ago, from 22 years ago. We have turned that playbook into gaining market share and focusing on operational discipline and operational excellence, especially in the face of economic headwinds.”

[RELATED: Salesforce’s Benioff: Economy Won’t Get ‘Any Better Anytime Soon’]

Why did Salesforce stock fall? While “the current economic situation is nowhere near as dire as what happened in 2008,” Benioff said, he’s still seen Salesforce customers halt hiring, halt marketing spend, halt ad spend, and even reduce the workforce, also in important service functions. .

“We don’t expect this economy to get better anytime soon,” he said. “We’re just reporting what we’re seeing in our customers, the kind of changes they’re making when they start to feel these headwinds. We are following our playbook to ensure that we are well positioned to gain market share, increase our profitability, focus on our operating margin, focus on growing our revenues and be able to continue to invest, especially when the economy recovers. …Salesforce is mission critical for almost every Fortune 1000 company, because every company becomes a customer company.”

During the call, Benioff shared his thoughts on how companies survive in a down economy.

“Everyone knows that now is the time, in a crisis like this, to focus on your customers,” he said. “If there’s one thing you have to do, if there’s one critical thing any business has to do to get through this, it’s to make sure they maintain their relationships with their customers. It’s an essential part of navigating this time, and you won’t be successful if you don’t stay in touch with your customers.”

Salesforce’s stock has continued to drop since the earnings report. The stock was trading Eastern Time Friday afternoon at $143.25 per share, about 10 percent lower than the price on the market that closed Wednesday.

Two investment banks issued positive reports on the expected future performance of the company.

While some third-quarter Salesforce measures fell below Wall Street expectations — including subscription and support revenues of $7.23 billion and invoices of $6.2 billion — other measures exceed expectations, according to reports from Wedbush and KeyBanc published on Thursday.

Measures exceeding Wall Street expectations include Slack revenue of $402 million, total quarterly revenue of $7.84 billion, service revenue of $604 million and an operating margin of 22.7 percent.

Salesforce’s focus on margins may be a result of activist investment firm Starboard Value to buy a stake in the seller, with improving margins specifically mentioned by the company.

The underperforming measures “signal a stronger-than-expected” estimated revenue slowdown for fiscal year 2024, according to the KeyBanc report. And yet, “despite growing macro headwinds, we continue to see longer-term secular drivers for Salesforce as a leader in front office digital transformation.”

Wedbush touted the adoption of multiple Salesforce clouds with 20 percent year-over-year growth and seven of the 13 cloud clouds with annual recurring revenue growth of more than 50 percent during the quarter.

While the report called Taylor’s imminent departure a “shock,” Benioff is “the heart and lungs of the Salesforce story,” Wedbush said.

The report suggested that without Taylor, Benioff “could become more aggressive on mergers and acquisitions (M&A) in the cloud landscape as more private and public vendors struggle in a softer macro backdrop” as Salesforce goes up against its main competitor. for market share in the cloud. and collaboration – Microsoft.

Benioff’s comments on the conversation suggested that Taylor is leaving to start a new business. Taylor joined Salesforce in 2016 with the purchase of Quip for $750 million. In 2009, he sold his company FriendFeed to Facebook.

“I know he wants to create a third big company,” Benioff said. “And you can’t keep a wild-caught tiger in a cage.”

Salesforce will continue without Taylor, who will leave Jan. 31, Benioff said. The company has engineers, marketers, product managers and geographic leaders to keep the business running.

And Benioff opened up the possibility that Taylor may not really be leaving. In what may have been joking on the call, Benioff told analysts that “until he (Taylor) walks out the door, don’t worry, I’ll keep trying to recruit him back.”

    Learn more about Wade Tyler Millward

Wade Tyler Millward

Wade Tyler Millward is an associate editor covering cloud computing and the channel partner programs of Microsoft, IBM, Red Hat, Oracle, Salesforce, Citrix, and other cloud vendors. He can be reached at wmillward@thechannelcompany.com.

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