Salesforce Notifies Some Staff of Job Cuts
August 26 2020 - 1:58PM
Dow Jones News
By Aaron Tilley
Salesforce.com Inc. has started to notify some of its staff they
could lose their job a day after the business-software provider
reported record sales, sending its stock surging.
Salesforce Chief Executive Marc Benioff in March pledged on
Twitter that the company would avoid any significant layoffs for 90
days during the pandemic even as the company shifted to remote
working. He called on other CEOs to follow him in a "no layoff"
pledge.
"We're reallocating resources to position the company for
continued growth," Salesforce said in a statement to The Wall
Street Journal. "This includes continuing to hire and redirecting
some employees to fuel our strategic areas, and eliminating some
positions that no longer map to our business priorities."
Around 1,000 of Salesforce's 54,000 employees are affected, a
person familiar with the plan said. Employees who were notified
their job was being eliminated have 60 days to find a new role in
the company, the person said.
For Mr. Benioff, who has made social causes a big part of his
public persona, the layoffs come at an awkward time. On Tuesday,
Salesforce lifted its full-year earnings outlook and posted a
record $5.15 billion in sales for the most recent quarter.
Salesforce said it expects to top that figure in the current
quarter in which the layoffs are unfolding.
The pandemic has caused companies to shift more of their work
online, with staff working remotely and individuals consuming
internet content. The demand has helped lift shares of the biggest
cloud infrastructure providers that enable those services. Shares
in e-commerce giant Amazon.com Inc., the No. 1 cloud infrastructure
provider, are up more than 80% this year, and shares in rival
Microsoft Corp. are up about 37%.
The shifts also have fueled investor sentiment in Salesforce.
"As the data points around accelerating digital transformation
continue to pile up, there are few better positioned to help with
customer-facing efforts than Salesforce," Canaccord Genuity analyst
David Hynes, Jr. said in a note.
Salesforce's stock was up more than 25% at mid-day Wednesday and
up more than 60% this year.
Generating higher sales during the pandemic hasn't been entirely
easy. While revenue grew 29% year-on-year, the costs to generate
that revenue jumped around 35%.
Although tech companies in general have fared far better than
other sectors during the pandemic, Silicon Valley hasn't been able
to completely avoid layoffs. Uber Technologies Inc., Lyft Inc. and
Airbnb have slashed thousands of jobs as their businesses have
struggled from the effects of the Covid-19 outbreak.
Salesforce signalled to analysts on an earnings call Tuesday
that changes were in planned.
"We'll be redirecting some of our resources to fuel growth, and
areas that are no longer as aligned with the business priority will
be de-emphasized," Salesforce Chief Financial Officer Mark Hawkins
said on the call, without spelling out where the cuts may fall.
Mr. Benioff, on the analysts call, said the pandemic has been a
trying time for his company's employees, with a third suffering
mental-health challenges.
(END) Dow Jones Newswires
August 26, 2020 13:43 ET (17:43 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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