Following the announcement about a 10% workforce reduction, Salesforce (NYSE:CRM) co-CEO Marc Benioff indicated in a virtual meeting last week that additional job cuts may be coming, per CNBC. Benioff expressed productivity concerns in parts of the sales department, mainly with regard to new account executives.
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Furthermore, citing the same meeting, Fortune reported that the customer relationship software (CRM) provider intends to slash its costs by $3 billion to $5 billion. Salesforce expanded rapidly as pandemic-led tailwinds fueled its revenue growth. However, given the slowdown in top-line growth, the company’s bloated workforce and elevated costs are weighing on its profitability. Salesforce had over 79,000 employees in December 2022 compared to 56,606 as of Fiscal 2021 (ended January 31, 2021).
Concerns over the Impact of Slack Acquisition
Many analysts question the value addition provided by Salesforce’s $27.7 billion acquisition of communications platform Slack in 2021. Speaking to the Wall Street Journal, Liz Herbert, vice president and principal analyst at Forrester Research, said, “We don’t really see, when it comes to Slack, any pent up demand from Salesforce’s base for a tool like that.”
Chief information officers (CIOs) are “broadly indifferent” to the Slack acquisition, opined Tim Crawford, CIO strategic adviser at IT advisory firm AVOA. “The Slack acquisition by Salesforce has not changed the trajectory of Salesforce up or down.”
Indeed, Katrina Agusti, CIO at clothing firm Carhartt Inc., stated that the Slack deal has not yet made Salesforce more valuable to her company. She also noted that Slack’s features are similar to Microsoft (MSFT) Teams, which her company continues to use. IT companies are trimming their spending due to fears of an impending recession. During these challenging times, including Slack and other tools in a CRM platform might backfire and turn buyers away, feels Gartner analyst Jason Wong.
Is Salesforce a Buy, Hold, or Sell?
Salesforce scores the Street’s Strong Buy consensus rating based on 27 Buys and eight Holds. The average CRM stock price target of $194.71 implies 38.6% upside potential. Shares have declined nearly 39% over the past year.
