Arm’s IPO, Instacart’s Valuation, and Salesforce’s Year of Efficiency | Prof G Markets

Activist Impact

Activist investors like Elliot Management have significantly influenced Salesforce's strategic decisions. Scott Galloway explains that Elliot's intervention provided the necessary pressure for Salesforce to cut costs and improve efficiency. This resulted in a dramatic increase in earnings, benefiting both the company and its shareholders 1. Scott notes, "Elliot doesn't have to fire the CEO. They don't have to stick around a long time. They just go in and say, you obviously have room to cut costs. Mark says, I get it, he does it. Elliot makes a shit ton of money. The stock recovers."

Elliot doesn't have to fire the CEO. They don't have to stick around a long time. They just go in and say, you obviously have room to cut costs. Mark says, I get it, he does it. Elliot makes a shit ton of money. The stock recovers.

--- Scott Galloway

This intervention has been a win-win for all parties involved, except for those laid off, who are expected to find new opportunities in a strong job market 2.

   

Financial Performance

Salesforce's recent financial performance has been marked by significant cost-cutting measures. Scott highlights that these efforts have led to a near 20-fold increase in quarterly net income, showcasing the power of strategic cost management 2. He states, "Cost cutting is a lot of fun from a shareholder standpoint. If there's costs to be cut and when you stuff so many calories down the esophagus of a growth company that it develops fat everywhere, you can do one of two things to add the same amount of earnings, say the operating margins are 20 points, which is very healthy operating margins you can either grow your top line by 5 billion or cut costs 1 billion, same effect to your earnings."

Cost cutting is a lot of fun from a shareholder standpoint. If there's costs to be cut and when you stuff so many calories down the esophagus of a growth company that it develops fat everywhere, you can do one of two things to add the same amount of earnings, say the operating margins are 20 points, which is very healthy operating margins you can either grow your top line by 5 billion or cut costs 1 billion, same effect to your earnings.

--- Scott Galloway

However, there are concerns about the broader SaaS market, where similar cost-cutting strategies may be impacting revenue growth. Scott argues that the slowdown in SaaS growth is more due to economic conditions than reduced investment 3.