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Elliott Management shakes up Salesforce board of directors

Yahoo Finance Live anchors discuss the appointment of Salesforce’s new board of directors.

Video transcript

[AUDIO LOGO]

JULIE HYMAN: Salesforce's board refreshment process continues as it appoints three new independent directors following the multibillion dollar stake from activist investor, Elliott Management. What may be written in the clouds for the future of this multinational tech corporation, that's where we find today's Sozzi's Take. I like that you've used refreshment of the board.

BRIAN SOZZI: Yeah.

JULIE HYMAN: They're very refreshed.

BRIAN SOZZI: I wish there would be some resolution, right? This whole ordeal--

JULIE HYMAN: It just started!

BRIAN SOZZI: Well, this whole deal really kept me up late last night, and we could all use--

JULIE HYMAN: What?

BRIAN SOZZI: We could all use our beauty sleep. You know? I mean, you can't be working til like 9:00, 10:00 sometimes. Even me. But nonetheless, here's where we got news. Yesterday at 9:00, what I reported was a person familiar with the matter telling me that Elliott is looking for a major board overhaul at Salesforce.

Now, I originally thought that Jesse Cohen, wildly-followed portfolio manager at Elliott, would be the one put forth for that board at Salesforce. But the person, or the source for me on this, suggests they might put forth several directors, potential nominees, ahead of the nominating window opening on February 12.

Now, I think, in a way, to get out in front of this-- because it's Salesforce and they always want to lead and be seen as a leader-- they came out this morning with three potential nominees of their own. Arnold Donald, which I got to know very, very well. A longtime CEO of Carnival. Just a really, really top executive. Sachin Mehra, the Mastercard CFO, and Mason Morfit over at ValueAct. Three solid choices.

But I don't think is going to appease the folks over at Elliott. I think they're working on numerous targets to put forth on this board. Might be three. Might be four. Now, as part of what Salesforce put forward, you had-- you're having Sanford Robertson, director since the early 2000s, and Alan Hassenfeld, who is the descendant of the founding family of Hasbro. We were talking about Hasbro as well. Both longtime directors here at Salesforce.

They said they will not stand for nomination to Salesforce as board. So the drama is high. I do think Elliott will come out with their proposed slate well before February 12, maybe potentially this weekend to get in front of that Monday news cycle. Maybe Sunday evening.

But nonetheless, here's what we have here. What activists will ultimately want from Salesforce just based on what I'm hearing and the people I'm talking to. Potential asset sales. I don't think this would be a good idea, just given how far tech valuations have fallen. I talked to one person who may want to see-- they may want to see Elliott, that is Salesforce divest the Slack. But they paid $20 billion for a Slack. I can't see them selling in this type of market here.

Better financial discipline. And then, ultimately, guidance. Right now, Salesforce is operating on no guidance for this fiscal year. The Street wants to see what the cost cuts and layoffs they just did, how does it impact earnings and what does this guidance look like for this year, given the economic slowdown that is impacting the likes of Microsoft, Amazon, and other cloud plays.

Overall, my take is this. Even though my desire to get some sleep of late is top of mind, I don't think-- I do think change is coming, and I do think the situation is going to get ugly. You have a lot of big egos here, a lot of big money at play as well, and you have a company in Salesforce that has never had to deal with an activist situation. They have only known growth and growth at all costs, pretty much since their founding. So I think they do find themselves in new waters, and I just think this is going to get very ugly and get ugly very soon.

BRAD SMITH: Do they hit those targets if an activist kind of campaign is successful in getting Elliot a position on the board?

BRIAN SOZZI: Well, they have an outstanding margin target longer term of 25% now by 2024, I believe, and that would be a big step up from what they posted last year. But the thinking is if they run their business more efficiently, maybe they hit 26%. Maybe they hit 27%. And if they sell off a couple of assets, can they get to 28% or 29%? I think that's what the likes of Elliott, and even starboard are ultimately betting on.