Salesforce. com Inc. has started to notify some of its staff they could lose their job a day after the business-software provider reported record sales, sending its stock surging.
Salesforce Chief Executive Marc Benioff in March pledged on Twitter that the company would avoid any significant layoffs for 90 days during the pandemic even as the company shifted to remote working. He called on other CEOs to follow him in a “no layoff” pledge.
“We’re reallocating resources to position the company for continued growth,” Salesforce said in a statement to The Wall Street Journal. “This includes continuing to hire and redirecting some employees to fuel our strategic areas, and eliminating some positions that no longer map to our business priorities.”
Around 1,000 of Salesforce’s 54,000 employees are affected, a person familiar with the plan said. Employees who were notified their job was being eliminated have 60 days to find a new role in the company, the person said.
For Mr. Benioff, who has made social causes a big part of his public persona, the layoffs come at an awkward time. On Tuesday, Salesforce lifted its full-year earnings outlook and posted a record $5.15 billion in sales for the most recent quarter. Salesforce said it expects to top that figure in the current quarter in which the layoffs are unfolding.
Starting next week, Salesforce’s stock will be one of the 30 making up the Dow Jones Industrial Average. The stock is being added in part to help offset the effects of Apple Inc.’s planned four-to-one stock split that would have given the information-technology sector a smaller representation in blue chip index.
The pandemic has caused companies to shift more of their work online, with staff working remotely and individuals consuming internet content. The demand has helped lift shares of the biggest cloud infrastructure providers that enable those services. Shares in e-commerce giant Amazon.com Inc., the No. 1 cloud infrastructure provider, are up more than 80% this year, and shares in rival Microsoft Corp. are up about 37%.
The shifts also have fueled investor sentiment in Salesforce. “As the data points around accelerating digital transformation continue to pile up, there are few better positioned to help with customer-facing efforts than Salesforce,” Canaccord Genuity analyst David Hynes, Jr. said in a note.
Salesforce’s stock was up more than 25% at mid-day Wednesday and up more than 60% this year.
Generating higher sales during the pandemic hasn’t been entirely easy. While revenue grew 29% year-on-year, the costs to generate that revenue jumped around 35%.
Although tech companies, in general, have fared far better than other sectors during the pandemic, Silicon Valley hasn’t been able to completely avoid layoffs. Uber Technologies Inc., Lyft Inc. and Airbnb have slashed thousands of jobs as their businesses have struggled from the effects of the Covid-19 outbreak.
Salesforce signaled to analysts on an earnings call Tuesday that changes were in planned.
“We’ll be redirecting some of our resources to fuel growth, and areas that are no longer as aligned with the business priority will be de-emphasized,” Salesforce Chief Financial Officer Mark Hawkins said on the call, without spelling out where the cuts may fall.
Mr. Benioff, on the analysts' call, said the pandemic has been a trying time for his company’s employees, with a third suffering mental-health challenges.