Salesforce will cut 10% of its workforce and reduce office space as part of a restructuring plan amid expectations that revenue growth will slow in fiscal 2024. CRM stock climbed on the news Wednesday.
In a filing with the Securities and Exchange Commission, the enterprise software maker said it expects to incur about $1.4 billion to $2.1 billion in charges from the plan. Up to $1 billion of the charges will impact the current January quarter, the company said.
The restructuring plan is "intended to reduce operating costs, improve operating margins, and continue advancing the company's ongoing commitment to profitable growth," Salesforce said in the filing.
Salesforce's Slowing Revenue Growth
In fiscal 2024, analysts estimate revenue growth of 11% for CRM stock, down from nearly 17% in the current fiscal year.
Salesforce had nearly 80,000 global employees as of Oct. 31. The company expects employee layoffs to be substantially complete by the end of fiscal 2024 with real estate reductions completed in fiscal 2026.
CRM stock rose 3.6% to close at 139.59 on the stock market today. Salesforce stock retreated nearly 48% in 2022.
Salesforce sells software under a subscription model. Its software helps businesses organize and handle sales operations and customer relationships.
Activist investor Starboard Value on Oct. 18 disclosed that it has taken a stake in CRM stock.
CRM Stock: Softening Corporate Demand
Salesforce recently announced co-Chief Executive Bret Taylor will depart amid other management changes. Marc Benioff will remain as the sole CEO of the company.
"CRM clearly is seeing headwinds in the field and thus is trying to quickly adjust to a softening demand environment," Wedbush analyst Daniel Ives said in a note to clients.
He added: "This (restructuring plan) is a smart poker move by Benioff to preserve margins in an uncertain backdrop as the company clearly overbuilt out its organization over the past few years along with the rest of the tech sector with a slowdown now on the horizon."
According to IBD Stock Checkup, CRM stock currently has a Relative Strength Rating of 20 out of a best-possible 99. The best stocks tend to have ratings of 80 and above.
In addition, CRM stock has an Accumulation/Distribution Rating of D-minus. The rating analyzes price and volume changes in a stock over the past 13 weeks of trading. The rating, on an A+ to E scale, measures institutional buying and selling in a stock. A+ signifies heavy institutional buying; E means heavy selling. Think of the C grade as neutral.
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