What happened

Shares of Salesforce.com (CRM -2.15%) jumped 12.6% this past week, according to data from S&P Global Market Intelligence. Investors are intrigued by the potential for activist investor Starboard Value to improve returns for shareholders. 

So what 

Following a roughly 40% decline in the software giant's stock price in 2022, Starboard founder Jeff Smith believes Salesforce's shares are undervalued. The multi-billion-dollar hedge fund, in turn, has decided to invest in the fallen tech star.

Though Smith declined to specify the size of his firm's stake during an interview with CNBC's David Faber, he said it was "significant." 

Starboard believes investors will begin to value Salesforce's stock more highly if it can bring its profit margins close to the levels of its peers. If it can do so, Smith hopes to remain a long-term investor in the cloud software leader as it works to serve an ever-growing number of customers.

"Salesforce is ingrained in the fabric of so many companies and has become so important in the way they operate and conduct businesses," Smith said. 

Now what

Salesforce is already working to bolster its profitability via efficiency initiatives. "While delivering incredible growth at scale, we're committed to consistent margin expansion and cash flow growth as part of our long-term plan to drive both top- and bottom-line performance," Co-CEO Marc Benioff said in the company's fiscal 2023 first-quarter earnings in May. 

Salesforce was forced to cut its full-year earnings forecast in August, due in part to a slowing economy that was driving many companies to pull back on their tech investments.  

Yet in September, Salesforce announced its long-term goal to achieve an adjusted operating margin of 25% by 2026. Management intends to rein in marketing expenses and headcount growth. Salesforce will also place a greater focus on remote work, which it says will help it reduce real estate expenses.