Wednesday’s Salesforce report provides another snapshot of the tech company’s continued success. In the quarter, revenue rose 10 percent and earnings per share increased 23 percent, matching analyst expectations and continuing a strong trend for the company. Strong demand for its CRM and cloud computing products drove growth in both channels, while new product development helped offset weakness in legacy software sales. Salesforce continues to dominate its industry with a market share of almost 60 percent. Wall Street analysts are upbeat about future prospects for the company despite recently reported slowing global growth rates,
The CRM leader faces difficult waters with five different activist investors, as well as a possible challenge from Salesforce.com, which announced its intentions to acquire the company for $9.5 billion earlier this year.
Many investors will be watching Unilever’s upcoming earnings call with keen interest, as the company has announced that its unprecedented CFO transition is causing some fluctuations in its financial reports. This is a serious issue for Unilever, given that it has traditionally been very reliable in terms of delivery of accurate financial statements. As such, any unusual changes could lead to drastic declines in share prices.
Activist investors have long been a fixture on the public equity markets, seeking to pressure companies into making changes that they believe will lead to increased shareholder value. In recent years, however, their presence has been drawing scrutiny from the general public and even some within the investor community.
Some worry that activist investors are too focused on extracting maximum value for their own accounts, regardless of the long-term sustainability of a company. Others worry that activist investors will simply seek to inflate a company’s stock price at any cost – even if this means compromising its underlying business fundamentals.
What Wang means by “vulture firms” is exactly what their name implies–these are firms that swoop in and take advantage of companies that are going through a tough time, by trying to negotiate near-total liquidation of the company’s assets. In Wang’s opinion, these firms do nothing but generate short-term profits at the expense of long-term stability for the companies they target.
Wang’s comments about the vulture firms suggest that they are not doing anything to help the companies that they take over, and in some cases can even damage them. This is likely because the vulture firms do not understand R&D or marketing spending needs, and instead only care about making money.
Given that Salesforce is one of the most financially successful companies in the world, it’s understandable why Wang believes a marketing budget is necessary for them to stay ahead of their competitors. However, if less spending means fewer new products released and more focus on profits, it could come at the expense of sales leads and customer loyalty.
Salesforce has undergone restructuring, announced price hikes for their products, and hopes to increase their number of customers. These movements, along with market conditions and competitor activity will have a meaningful impact on the company’s earnings report.