![]() ![]() Moreover, there is no way a company the size of Salesforce would appoint an activist to their board without previously having deep discussions with him or for the primary purpose of heading off a potential proxy fight. It likely had been engaging with Salesforce management for several months, and this appointment may have happened just as a threatened proxy fight was reported. Based on ValueAct's history and philosophy, the firm would not take a board seat unless it had a large investment, and the firm would not make a large investment until it evaluated the company for many months. We strongly believe that appointing Morfit to the board certainly decreases the chance of another activist being successful in a proxy fight, but to be clear, that is not why the company appointed him. We have followed every activist campaign over the past 17 years. The looming question is whether he will initially be doing this with an activist cloud hanging over the company's head in the form of a proxy fight by one of the other activists involved. Morfit has experience helping management increase both growth and margins from a board level, and both can be improved at Salesforce. Salesforce currently has a revenue growth rate of 17.0% and 20.4% operating margins, which brings it to 37.4 combined. As shown in Starboard's detailed presentation, Salesforce peers are operating at a "rule of 50" – the average revenue growth plus adjusted operating margins of peers equals 49.4. This valuation discount can be largely attributed to Salesforce's subpar mix of profitability and growth, which has come down significantly from its historic levels. 6.7x for peers) and free cash flow expectations (18.7x vs. ![]() But, as Starboard noted in its presentation on the company, Salesforce has underperformed peers, the technology sector and broader market over the past three years and is valued significantly below the peer median multiple on forward revenue (3.8x vs. Salesforce has a leading market position and has historically had strong annual top line growth. Salesforce's transformation has the potential to be as notable as many of ValueAct's other successful investments, even if the playbook is customized. When you get a ValueAct partner on the board, you get the whole ValueAct team and the collective experience of the 55 public company board seats they have taken to work on strategy, succession, compensation, financial planning and analysis, M&A, capital allocation and cost reduction. ValueAct also presently has positions in Insight Enterprises (NSIT), one of the largest software distribution companies where ValueAct partner Alex Baum is on the board, and Trend Micro, a cloud cybersecurity company. Adobe went from a $14 billion market cap when ValueAct invested to $168 billion today. At Adobe, ValueAct took a board seat as the company transformed from a package software provider to a subscription cloud service. The company's market value went from approximately $250 billion to $1.8 trillion. ![]() Microsoft blew away those cloud targets and annual cloud revenue went from approximately $1 billion in 2013 to over $100 billion today. During that transition, the board set cloud targets for management and tied them to a unique executive compensation plan that paid out at stretch goals for the cloud. Morfit was on the board of Microsoft from March 2014 through the end of 2017 as the company transformed into a cloud-based enterprise software business. ValueAct has extensive experience in technology companies like Salesforce, most notably Microsoft and Adobe. Personal Loans for 670 Credit Score or Lower Personal Loans for 580 Credit Score or Lower Best Debt Consolidation Loans for Bad Credit ![]()
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