Salesforce, a cloud-based customer relationship management (CRM) software company, recently announced a major cost-cutting initiative that will involve layoffs of 10% of its workforce, as well as select real estate exits and office space reductions. The company estimates that it will incur charges of $1.4 billion to $2.1 billion related to these actions. The CEO of Salesforce, Marc Benioff, acknowledged that the company had hired too many employees during the pandemic, leading to an economic downturn. He stated in a letter to employees, “As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we’re now facing, and I take responsibility for that.” This cost-cutting measure is being implemented as Salesforce is facing pressure from Wall Street to improve its profit margins, following a series of high-profile acquisitions such as Slack, Tableau, and Mulesoft. Salesforce shares rose 3.4% in afternoon trading on the news of the cost-cutting initiative.
The company has set a goal of achieving a 25% operating margin by calendar year 2025, which would be a significant increase from 2022’s goal of 20.4%. This cost-cutting initiative is also in line with other tech giants such as Meta and Snap, who are also implementing similar measures amid a more muted demand backdrop. Salesforce declined to comment on which real estate it would be exiting or offices it would be reducing. Despite these cuts, Benioff has previously pushed back on the view that Salesforce isn’t listening to investor concerns. He stated in an interview with Yahoo Finance Live, “For us, I think that the market doesn’t fully appreciate how committed we are to growth and margins.”
