What happened
Shares of Salesforce (CRM 3.45%) were moving higher Monday on reports that management might institute another round of layoffs beyond the one it announced last week, when it said it was cutting roughly 10% of its staff, or 8,000 employees.
The stock, which also seemed to benefit from a broader tailwind for tech stocks Monday, was up by 4% as of 10:58 a.m. ET.
NYSE: CRM
Key Data Points
So what
At an all-hands meeting on Thursday following that initial round of job cuts, CEO Marc Benioff seemed to suggest that more reductions could be coming. Benioff noted that about 95% of the company's deals come from half of its account executives, implying that there's a lot of wasteful spending at the company or underperformance among its sales force.
Recent acquisitions, including Slack and Tableau, have also come under scrutiny, and the employees brought in via those deals made up an outsized share of those targeted in the initial round of layoffs. Employees from Tableau, the data platform company that Salesforce acquired in 2019 for $15.7 billion, were hit especially hard.
Benioff said he was aiming for $3 billion to $5 billion in cost cuts, and targeting real estate as well as staffing, noting that some of the company's offices have less than 10% occupancy.
Now what
At its September Investor Day conference, Salesforce promised to improve operating margins and better control costs. After several high-priced acquisitions and heavy spending on stock-based compensation, investors seem to believe the company has become bloated and inefficient.
Though layoffs mean real people are losing their jobs, the cuts are often greeted warmly by Wall Street as investors expect them to lead to increased profitability. In the initial layoff announcement, Benioff said bluntly the company had hired too many people during the pandemic.
Management's renewed focus on the bottom line should hopefully get profitability moving in the right direction again for the cloud software company.
