- Marc Benioff is preparing for a recession that shows shades of the dot-com crash and the financial crisis.
- Salesforce CEO shifts focus from sales and deals to efficiency and profitability.
- Benioff warned that falling stocks and recession fears are curbing corporate spending.
Marc Benioff has sounded the alarm about the US recession, drawing parallels between the coming recession and both the dot-com crash and the financial crisis.
Salesforce’s CEO has also warned that the enterprise software titan now faces a tougher playing field and in response will focus on boosting profitability rather than increasing sales or buying companies.
“There were times when we had to step back,” the Salesforce CEO said during a fourth-quarter earnings call on Wednesday, according to a transcript provided by AlphaSense/Sentieo.
“’01, ’02, bad recession, we had to retire,” Benioff continued. “’08, ’09, we had to pull back and reevaluate. We see this moment as, ‘Hey, we can reevaluate.’
Salesforce’s billionaire co-founder shrugged off some of the headwinds that began hitting his company last year.
“Currencies, measured buying environment, macroeconomic conditions, inflation, stock market,” he said.
In response to historic inflation, the Federal Reserve raised interest rates from near zero to 4.5% last year. It aims to encourage saving over spending and make borrowing more expensive, to reduce inflation.
However, these higher interest rates have lifted the US dollar, depressed asset prices and inspired fears of an economic recession.
Benioff noted on the call that when fears about stocks and recession rise, bosses stop hiring salespeople and cut marketing spending. Tighter corporate budgets are bad news for Salesforce, a customer relationship management (CRM) specialist.
“As soon as the stock market explodes, CEOs, they hit the brakes,” he said. “We saw that in ’08, ’09. I think we really started to see it in mid-’22.”
Salesforce responded by shifting its focus from chasing sales and closing deals to cutting costs and boosting efficiency.
As a result, it has scrapped its goal of reaching $50 billion in annual revenue by 2026. It also disbanded its M&A committee after buying Slack and Tableau in recent years.
The software group widened its operating margin from 22.7% to 29.2% in the last three months of 2022 and plans to reach at least 30% by the first quarter of 2025. The company has cut about 8,000 jobs, or 10% of its workforce since the beginning of this year.
“We have a recession playbook,” Benioff said. “We know how to transform the company.”
Investors welcomed his commitment to prioritize profitability. They sent Salesforce stock up as much as 14% in early trading Thursday.