Salesforce enters its activist investor era

Winds off the Starboard bow

Salesforce’s stock went up more than 7% on Tuesday after activist investor Starboard Value revealed a significant stake in the company, according to CNBC. Starboard Value founder Jeff Smith told CNBC he remains confident in Salesforce’s ability to deliver value, and plans to invest in the company long term, but said the company has "subpar mix of growth and profitability."

The move should make the last quarter of 2022 a little more interesting for Salesforce's executive leadership.

• During last quarter’s earnings call, Salesforce announced 26% year-over-year revenue growth, but also lowered its full-year guidance.
• Then, during its flagship Dreamforce conference in September, the company announced new Slack features and the real-time customer data platform Genie, which were intended to push the company toward its $50 billion revenue goal.
• But investors were skeptical that Genie was a real engine for growth.

Although Salesforce has been a darling of the investor community based on its past performance, concerns about the company’s customer data platform vision, the price tag attached to the Slack deal, and its lack of profitability made more than one investor question the SaaS giant’s ambitions.

• “I don’t see how they hit that $50 billion … It’s just not going to happen,” Guggenheim Partners analyst John DiFucci told Protocol last month. “We can’t get there. I wish.”
• Just weeks later, the company laid off a number of workers and implemented a hiring freeze through January 2023. At least 90 people were impacted by the layoffs, according to sources.
• All of those developments sent Salesforce’s stock tumbling. So far this year, the SaaS giant’s stock is down more than 40%, making Tuesday's gains rather notable.

But Salesforce has a rocky road ahead as investors pressure the company to transition away from growth mode.

• Activist investors have a mixed track record in forcing tech companies to make big changes, but there's no question their presence makes the C-suite nervous; at least Salesforce has two people in the role to share the burden.

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Oracle ups its Ampere stake

Without much fanfare, Oracle has now poured roughly $850 million into Arm server chip design startup Ampere since its inception in 2017, according to SEC filings.

Oracle’s stake in Ampere appeared to grow by more than $400 million earlier this year, after Oracle disclosed that it had invested $300 million in convertible debt issued by Ampere in fiscal 2022 and acquired more Ampere stock from an undisclosed investor for $127.8 million, according to the company’s proxy statement filed with the SEC.

The size of Oracle’s bet on Ampere became clear in March after Oracle blamed a wider-than-expected operating loss, in part, on Ampere, Protocol reported. At the time, SEC filings revealed that Oracle had invested $426 million in the company, and including Ampere in its operating losses implied a stake of 20% to 50%, according to accounting rules.

Part of Oracle’s earlier investment in Ampere included another $300 million payment in an equity fundraising round in March 2021, and an agreement to purchase tens of millions of dollars worth of server chips designed by Ampere. The most recent proxy statement indicates Oracle has purchased $50.9 million worth of Ampere chips in fiscal 2022, including $21.6 million against a $25 million prepayment Oracle made in fiscal 2020.

Ampere’s founder and CEO, Renee James, also sits on Oracle’s board. Oracle has been quietly investing in Ampere since 2017, and prior to the investment, James, who has served on Oracle's board since 2015, was considered an independent board member. James was formerly president of Intel.

Ampere designs chips based on Arm technology and has made slow inroads into the data center CPU market, which is dominated by Intel and AMD. This market has long been dominated by Intel, but over the last few years it experienced manufacturing and other difficulties that led to delays launching new products, allowing AMD to pick up a bigger chunk of server chip sales and creating room for new entrants.

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Around the enterprise

In other Oracle chip news, the company signed a partnership with Nvidia to purchase a significant amount of Nvidia’s AI chips for its cloud services, although details of the arrangement were not disclosed.

AWS announced a new cloud region in Thailand, with plans to invest $5 billion to build new computing capacity in the country.

Adobe added new AI-powered tools to Photoshop, its flagship graphic design software, during the first day of its Adobe MAX conference in Los Angeles.

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