Salesforce (NYSE: CRM) plans to reduce its workforce by 10% and close certain operations, citing the necessity to reduce expenditures after a rise in hiring during the pandemic left it with “too many people” in the face of a slowing economy.
“I’ve been thinking a lot about how we came to this moment. As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we’re now facing, and I take responsibility for that,” CEO Marc Benioff wrote in a company letter to employees.
The cloud-based software provider stated on Wednesday that it anticipates charges related to the job cutbacks of between $1.4 billion and $2.1 billion, of which between $800 million and $1 billion will be recognized in the fourth quarter.
Benioff relayed that affected employees “will receive a minimum of nearly five months of pay, health insurance, career resources, and other benefits to help with their transition.”
The company announced that in fiscal third quarter, revenues grew 14.2% yearly, or 19% with a constant currency of $7.84 billion. This growth trickled down to gross profits, which increased 14.5% to $5.75 billion, or a 73.4% gross margin.
However, the most recent quarterly performance is the company’s weakest revenue increase.
For the fourth quarter, the company expects revenues to come between $7.932 and $8.032 billion, or an 8% to 10% yearly revenue growth and GAAP earnings per share of $0.23 – $0.25. On the new full-year guidance, the company expects revenues to be between $30.9 and $31.0 billion with a GAAP operating margin of 3.8%. GAAP-compliant full-year earnings per share is expected to be $0.55 – $0.57.
In BMO Capital Markets’ note on the results, they reiterated their outperform rating but lowerered their 12-month price target to $172, down from $180, saying that the company’s guidance and management commentary makes it tough to paint a good growth outlook.
The software firm joins the likes of Meta Platforms and Amazon which reduced their workforces last year in order to get ready for a severe downturn as central banks around the world have aggressively raised interest rates to combat persistently high inflation.
At the end of January of last year, Salesforce had 73,541 employees, an increase of 30% from 2021.
Salesforce last traded at US$139.35 on the NYSE, jumping an initial 5% when the markets opened.
Information for this briefing was found via Yahoo Finance, Reuters, and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.