Salesforce CEO Marc Benioff sounds the alarm on recession - with shades of the dot-com crash and financial crisis

Marc Benioff is bracing for a recession that shows shades of the dot-com crash and financial crisis.
The Salesforce CEO is shifting his focus from sales and deals to efficiency and profitability.
Benioff warned that falling stocks and recession fears dampen corporate spending.

Marc Benioff has raised the alarm on a US recession, drawing parallels between the coming downturn and both the dot-com crash and financial crisis.

The Salesforce CEO has also warned the enterprise-software titan now faces a tougher backdrop, and in response he will focus on boosting profitability instead of growing sales or buying companies.

"There have been moments where we've had to pull 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 pull back," Benioff continued. "'08, '09, we had to pull back and reassess. We're kind of looking at this moment as, 'Hey, we can reassess.'"

Salesforce's billionaire cofounder rattled off some of the headwinds that started buffeting his company last year.

"Currencies, measured buying environment, macro conditions, inflation, the stock market," he said.

In response to historic inflation, the Federal Reserve has hiked interest rates from virtually zero to upwards of 4.5% within the past year. Its goal is to encourage saving over spending, and make borrowing more expensive, to cool price growth.

Yet those higher rates have lifted the US dollar, pulled down asset prices, and stoked fears of an economic downturn.

Benioff noted on the call that when stocks tank and recession fears mount, bosses stop hiring salespeople and slash their marketing spend. Tighter corporate budgets are bad news for Salesforce, a specialist in customer relationship management (CRM).

"As soon as the stock market implodes, CEOs, they hit the brakes," he said. "That's what we saw in '08, '09. I think we really started to see that in the middle of '22."

Salesforce has reacted by shifting its focus from chasing sales and striking deals, to cutting costs and boosting efficiency.

As a result, it has scrapped its goal of hitting $50 billion of annual revenue in 2026. It has also disbanded its mergers-and-acquisitions committee after buying Slack and Tableau in recent years.

The software group widened its operating margin from 22.7% to 29.2% during 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 start of this year.

"We have a recession playbook," Benioff said. "We know how to transform the company."

Investors welcomed his pledge to prioritize profitability. They sent Salesforce stock up as much as 14% in early trading on Thursday.

Read the original article on Business Insider

Contributer : Business Insider https://ift.tt/6SBmtds

Something that you might miss to see?