Marc Benioff, co-founder and chief executive officer of Salesforce.com Inc., speaks at the WSJDLive Global Technology Conference in Laguna Beach, California, USA, on Wednesday, October 26, 2016. The conference brings together an unparalleled group of top CEOs, founders, pioneers, investors and celebrities to explore tech opportunities emerging around the world.
Patrick T Fallon | Bloomberg | Getty Images
Turbulence in the upper echelons at Salesforce doesn’t sit well with Wall Street.
On Monday, the company announced the departure of Slack CEO Stewart Butterfield, who joined Salesforce last year as part of its largest-ever acquisition. Last Wednesday, Salesforce co-CEO Bret Taylor, who orchestrated the Slack deal, said he would be leaving — exactly one 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, falling 8.3% and 7.4%, respectively. Salesforce has now lost 47% of its value for the year, compared to the 28% drop on the Nasdaq, and is trading at its lowest level 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 had “decided to return to my entrepreneurial roots.” Benioff said of the earnings call, “We have to release him, let him go, and I understand, but I don’t like it.”
Butterfield made it clear that he is leaving for several reasons.
“I’m not going to do anything entrepreneurial,” Butterfield wrote in a Slack post viewed by CNBC. “As trite as it may sound, I’m really going to be spending more time with my family (besides working on some personal projects, focusing on health and generally spending time on those things that [are] harder to do when one runs a large organization).”
While Taylor and Butterfield are the most prominent exits, they are far from alone among Salesforce’s executive ranks.
Last month, Salesforce said Gavin Patterson, its president and chief strategy officer, would leave in January, and on Thursday Mark Nelson, president and CEO of Salesforce’s Tableau product, tweeted that it was his last day.
Along with Butterfield, Slack loses product chief Tamar Yehoshua and Jonathan Prince, senior vice president in charge 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 succeeded by Lidiane Jones, an executive vice president at Salesforce who joined in 2019.
Salesforce’s three-day dive
“Two Elephants in the Room”
Slack was a pandemic-inspired takeover. As employees were forced to communicate remotely, Slack’s popular chat app exploded. In a series of tweets on March 25, 2020, Butterfield said the company had “experienced early signs of an increase in teams created and new paid customers like we’ve never seen before,” adding that the shift from email to chat channels, “that which we thought was inevitable in 5-7 years has now accelerated 18 months.”
Salesforce was so excited about Slack’s expansion that it paid more than $27 billion for the company at an expected price-to-sales ratio of 24, one of the highest multiples ever seen in software. Taylor’s name was all over the deal, even though he wasn’t yet co-CEO. Taylor contacted Butterfield multiple times in August and September 2020 about a possible acquisition, and the two negotiated throughout the process, culminating in an agreement announced on December 1 of that year, according to a filing with the SEC.
Salesforce’s purchase of Slack was completed in July 2021, and the stock peaked at nearly $310 four months later. Since then, it has lost 57% of its value, closing on Monday at $133.93.
Like its esteemed tech peers, Salesforce has suffered this year from skyrocketing inflation and rising interest rates, which have pushed investors into parts of the market that were considered safer during a slowdown. Salesforce’s results haven’t helped. Last week, the company reported sales growth of 14% in the third quarter, the slowest growth since the company went public in 2004. The forecast for the fourth quarter is growth of 8% to 10%.
In a break from Q3 tradition, Salesforce failed to provide guidance for the next fiscal year.
Guggenheim analysts wrote in a report that there were “two elephants in the room.” The first was the omission of guidelines for the coming year.
“The second elephant in the room is why Bret Taylor decided to relinquish his high-profile co-CEO and vice-chairman position after just one year,” wrote the Guggenheim analysts, who gave the equivalent of a hold rating on the stock. to have. The analysts reminded clients that Keith Block resigned as co-CEO three years ago after 18 months on the job, writing that “the company seems to have struggled since then.”
Following Taylor’s announcement last week, Wedbush analysts wrote that “the Street will take this as a shock with Taylor as one of the pillars of its CRM strategy.”
A spokesperson for Salesforce declined to comment, beyond repeating a statement the company had previously sent about Butterfield’s departure.
On Thursday, Wolfe Research downgraded Salesforce shares to the equivalent of holding a buy. They wrote that the company is moving into “a new and difficult chapter” after execution errors, the departure of big names and slowing revenue growth.
The only day in 2022 that Salesforce’s stock was hit harder than Thursday or Monday was at the very beginning of the year. On January 5, UBS acquired Salesforce and Adobetelling clients that business technology spending was pushed forward by the pandemic, leading to slower sustained growth for the two companies.
WATCH: Salesforce stocks under pressure after co-CEO Bret Taylor resigns