Salesforce is cutting about 8,000 jobs globally, representing about 10% of their workforce. In a January 4, 2023 Securities and Exchange Commission filing, Salesforce announced they were restructuring to cut costs and improve operating margins with an eye toward profitable growth. In addition to the layoffs, Salesforce will reduce its physical footprint, including closing some offices and reducing office space in certain markets.
The SEC 8-K filing included the following financial highlights associated with the restructuring:
- Salesforce estimates it will incur $1.4 billion to $2.1 billion to execute the plan. Approximately $800 million to $1.0 billion will be incurred in the fourth quarter of fiscal year 2023.
- Approximately $1.0 billion to $1.4 billion of those expenses include employee transition costs, severance payments, employee benefits and share-based compensation.
- Employee restructuring costs should be completed by the end of the Salesforce’s fiscal 2024.
- Another $450 million to $650 million are related to the reduction of office space.
Founder and CEO Marc Benioff notified employees in a letter dated January 4. He noted that, over the last 23 years, Salesforce has built the #1 CRM. However, with the current economic uncertainty looming, the company has decided to reduce its workforce.
“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,” wrote Benioff.
He explained that, within an hour of sending that letter to employees, those who will be impacted will receive an email to let them know. Leadership would reach out to them directly and explain how these changes affect internal teams.
“For those who will be leaving Salesforce, our priority is to fully support them, including by offering a generous package. In the U.S., affected employees will receive a minimum of nearly five months of pay, health insurance, career resources, and other benefits to help with their transition,” Benioff added.
He thanked the employees for contributing to the company’s success, and he asked colleagues of those losing their jobs to reach out to them compassionately and with love.
“Please lean on your leadership, including me, as we work through this difficult time together,” said Benioff.
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The news comes just a month after the company announced their third quarter fiscal 2023 results and announced that Bret Taylor, Salesforce vice chair and Co-CEO, would step down, effective January 31, 2023. According to a November 30, 2022 news release, Taylor said his six years at Salesforce were “fantastic,” but he wants to return to his entrepreneurial roots. Benioff said that Taylor’s departure was “bittersweet.” After Taylor leaves, Benioff will be chair and CEO of Salesforce.
Q3 FY 2023 financial highlights
In the company’s third-quarter financial report for fiscal year 2023, Salesforce said they double-digit growth. Highlights include:
- Revenue of $7.84 billion, a 14% increase year-over-year
- Operating margin (GAAP) of 5.9%
- Earnings per share of $0.21
For the full fiscal year 2023, Salesforce estimated the following:
- Revenue between $30.9 billion and $31.0 billion
- Diluted earnings per share between $0.55 and $0.57
Insider Take
Another tech giant takes a hit during the economic downturn. Like Microsoft, Amazon and Meta, Salesforce did well during the pandemic, scaling up to meet demand. Now that the prices have increased and the economy is more volatile, large tech companies are finding that they can’t afford to keep the stay they hired to support the growth. Many subscription and SaaS companies are experiencing the same harsh realities, regardless of size. We understand that making such painful changes are necessary for long-term sustainability, but that doesn’t make it easier for the thousands of employees who are without jobs as we start a new year.
