💃 Activist Investors Activating the Cranking Up of Salesforce Prices?!?🕺

Good morning, Salesforce Nerds! Happy New (Fiscal) Year from your favorite SaaS CRM company Salesforce! It's that time of year to meet your new Salesforce Account Executive and hear about all the amazing products your are not subscribing to but need to subscribe to........what's that? Who's that knocking on your door? Your new friendly neighbors/overlords in FY2023!!! The Activist Investors - Elliot Management, Starboard, ValueAct, and Inclusive Capital (those are happy, gentle names!) - looking to make a profit on their sizable investment! What could that mean for our Salesforce costs and the traditionally lax enforcement of their tiered pricing?

Agenda for today includes

• Activist Investors Planning Activist Investor Things??

• Daily Principle

• All the Memes

Activist Investors Planning Activist Investor Things?!

As mentioned in a previous article (click here if you missed it), Activist Investors want one thing, 💵 to make money 💵, and they know how to get their way. Since the announcement that Elliot Management bought a multi-billion dollar stake in Salesforce, three more Activist Investors - Starboard, ValueAct, and Inclusive Capital (can't get over these names....) have been made public. Their profit comes through share price increases, in which they hold billions of dollars in shares. Share prices go up when there is confidence in the company. Here are 3 things that may increase investor confidence

1. Increase in Revenue

2. Decrease in Costs

3. Confidence in Leadership to Increase Revenue and Decrease Costs

Let's explore some scenarios that Salesforce may achieve these, including one devastating strategy that may impact your org costs-

Increase in Revenue - a leveraged move Salesforce can make is to increase subscription fees - for Salesforce, this is licensing fees. The "standard" enterprise license cost is $150. If Salesforce increased that by 6%, to $159, what would that do? For simple math, let's say there are 100,000 provisioned enterprise licenses out there.

• 100,000 x $150 = $15,000,000

• 100,000 x $159 = 15,900,000

That's a nice increase in revenue that does not require more people (payroll costs) or more technology (AWS cloud computing costs). It scales really well by adding a few 0's. Will Salesforce experience churn if they increase their rate? Possibly. Will that increased revenue caused by the price increase be higher than the churn losses? Possibly. Finding that sweet spot of price increase to actually realize an increase in revenue may be tricky, but people are paying $8 for a dozen eggs, so........

Another increase in revenue could be the sale proceeds of, for example, Tableau, Slack or some other product. The Street has made it known they do not appreciate these purchases and if the Activist Investors agree, we could see a sale.

Perhaps the most devastating strategy for increasing revenue would be actual enforcement of Salesforce's traditionally lax tiered pricing. One example is the 7% increase in annual license fees (read your Salesforce contracts, it's in there) that is rarely enforced. Another example is overages, like data storage. If you've ever exceeded 100% of your data storage capacity, you probably got a friendly email from your AE asking you to do something about it asap, and a bi-weekly follow up until it's resolved. But the enforcement of a price increase when you exceed capacity is, again, rarely, if ever, enforced, even though they are well within their rights to do so. Salesforce has always been an excellent partner in this regard.

Reduce Costs - Salesforce has already gone through a round of layoffs this year. Will there be more? With the new fiscal year, will Marc lay the hammer down and demand higher output from his workforce? Will the "more, with less" justify cutting more workers (like it matters if it's "justified"....)? Salesforce headcount is still higher today than pre-pandemic, while market cap is lower today than March 2019. That is not a good metric for avoiding another round of layoffs, especially with thirsty Activist Investors having a seat at the table this time around.

Another cost saving move is to....not move at all - Salesforce is probably not making any significant purchases in FY2023, like Tableau and Slack in previous years

Confidence in Leadership to Increase Revenue and Reduce Costs - Clearly there is confidence in the Activist Investors to do these things - Salesforce stock is up about 10% since Elliot Management's stake was first announced last week.

This week's shake up of Saleforce's board of directors (3 new board members have been named, with a fourth likely to be announced soon to represent Elliot Management) has been met with cheers from The Street, in the form of a rising stock.

Salesforce has not actually raised prices, enforced pricing tiers, or had a second round of layoffs. Is the understanding that these Activist Investors intend to execute these types of things the writing on the wall that it's just a matter of time until they do happen?

Daily Principle

-Bill Watterson ❤️

and now....Your Daily Memes

But First - refer a friend in the link at the bottom of the email and receive a Salesforce Salary Guide that includes salary ranges from 2019-2022 and how they may shake out in 2023!