Starboard strikes again – this time it’s Salesforce Inc

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on Oct 18, 2022
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  • Starboard Value takes a "significant" stake in Salesforce Inc.
  • Founder Jeff Smith explained why in an interview with CNBC.
  • Salesforce stock is currently down about 40% for the year.

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Salesforce Inc (NYSE: CRM) is up nearly 5.0% this morning after Starboard Value revealed to have taken a “significant” stake in the enterprise software company.

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What does it want from Salesforce Inc?

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Starboard wants Salesforce to do more in terms of improving its profit margins. But it’ll be hard for the activist investor to influence considering the cloud company has a market cap of over $150 billion.

Nonetheless, down about 40% for the year, it was a fairly attractive investment, that’s per Jeff Smith – the Founder and Chief Executive of Starboard Value.

Salesforce hasn’t been as focused on operating margins as we think they should be. They’re focused on being number but on this metric in particular, they’re not even average. So, they need to get above average.

He’s already had constructive talks with the management. A day earlier, Invezz reported Starboard to have a close to 5.0% stake in Splunk Inc as well.

Salesforce is lagging behind rivals on margins

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Salesforce is targeting as much as $50 billion in revenue by fiscal 2026 and 25% operating margins by then. Still, Smith said in an interview with CNBC’s David Faber:

As it turns out, with their peers, the median number is around 50%. Adding growth rate and profit margins, as a great company, they really should be at that number or higher, and they’re not.

The announcement arrives more than a month after Salesforce issued disappointing guidance for its fiscal 2023. Starboard is yet to reveal the dollar value of its stake in the California-based company.

Wall Street currently has a consensus “buy” rating on Salesforce Inc.

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