Dive Brief:
- Salesforce plans to lay off 10% of its workforce as challenges in the operating environment press the software maker to scale down, the company said in an SEC filing Wednesday. The layoffs will impact around 8,000 employees.
- “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,” said co-CEO Marc Benioff, in a letter sent to employees.
- The company plans to spend up to $2.1 billion in its restructuring plan, a process it expects to complete by the end of fiscal year 2024, the filing said.
Dive Insight:
The coming layoffs and office closures are the latest signs of trouble at Salesforce, which has seen a number of leadership changes, including the departure of co-CEO Bret Taylor depart in November and Slack CEO and Co-founder Stewart Butterfield.
Salesforce CFO Amy Weaver had previously flagged the intense customer scrutiny over software spending, speaking last month during the company’s most recent earnings call. Now, the shift in customer behavior is translating to cost-cutting measures at the enterprise software company.
The company, known for its customer relationship management solution, is facing market saturation.
“The vast majority of CRM buys have already converted to SaaS, and Salesforce has been for years a dominant choice in that market,” said Liz Herbert, VP and principal analyst at Forrester. “In their core business areas they’re no longer the up-and-comer chasing SaaS conversion, displacing legacy tech: they are the established incumbents, and the market is saturated.”
Despite the challenges, Salesforce managed to grow revenue 14% year-over-year during the third quarter of Q3, for the period ending Oct. 31, bringing in $7.84 billion.
In addition to staffing cuts, the company plans to reduce physical offices “within certain markets” and expects to incur up to $650 million in exit charges associated with the real estate reductions.
