Salesforce Announces Record Q2 Earnings, Dow Jones Listing, 1,000 Layoffs
Updated: Oct 21
Salesforce surprised Wall Street prognosticators and posted its first ever $5B quarter. At the same time, the software juggernaut secured a coveted spot on the Dow Jones Industrial Average and announced layoffs of 1,000 in a move to “reallocate resources to more strategic areas”. What does this news mean for IT buyers?
Salesforce earnings are still down from its initial full-year outlook released in Q1, so sales reps will still be hungry to close deals in Q3 and into the year end. These reps had received a one-time guaranteed commission for the first quarter as a temporary relief measure in response to COVID-19. This relief is no longer provided, so reps will likely be more aggressive to hit their numbers. This is good news for buyers, who will enjoy more leverage in deals. We urge clients to take advantage of this period and push for aggressive discounting in new Salesforce purchases and renewals.
We know that a significant portion of Salesforce recent revenue growth stems from sales of Customer 360 Platform and Commerce Cloud, fueled by the explosive demand in the E-commerce market in the wake of COVID-19. These offerings will continue to be strongly pushed, so customers considering these products are advised to press for highly favorable terms and conditions.
Being a part of the Dow listings will further boost Salesforce’s business profile, which already benefits from a strong brand and loyal following. Watch for a stock increase that often follows being added to an index like the DJIA because of the increased name recognition.
Previously, we have seen Salesforce capitalize on financial success to distract from negative news in their employee base. The most recent example was the February 25 announcement of co-CEO Keith Block stepping down during their FYE 2020 earnings report, which included the $1.3B acquisition of Vlocity. We contend that the staff cuts will serve to further incentivize the sales team to (1) keep their customers happy, and (2) make quota to secure their own positions.
Dan Beyh is an Analyst II at ClearEdge Partners.