Dreamforce16 - the elephant in the room tweeting down the Salesforce stock price

Stuart Lauchlan Profile picture for user slauchlan October 5, 2016
Summary:
Twitter rumors formed a dark cloud hanging over Dreamforce, but Salesforce CEO Marc Benioff isn't being bounced into yes or no answers.

Elephant on tightrope in cloudy blue sky © Sergey Nivens – Fotolia.com
There was an elephant in the room during the main Dreamforce keynote - a Salesforce share price slump on the back of continued speculation of a potential bid for Twitter.

The drop was triggered by reports in the Wall Street Journal suggesting that the social media firm intends to begin fielding offers this week and that Salesforce CEO Marc Benioff is keen on making a move.

Wall Street doesn’t seem so convinced however, with Salesforce’s stock price hitting a seven month low in the hours before Benioff’s big moment on stage in front of the Dreamforce faithful.

Regardless of the veracity or otherwise of the scuttlebutt, it was horrible bad timing, distracting from what is the single most important presentation of the year for Benioff and his team.

While the party line from Salesforce spokespeople remains resolutely on message - no comment on speculation - Benioff himself had to address the issue in an interview with CNBC when he said:

We look at everything. We have to understand what is possible for our shareholders, what isn’t. But in the scheme of things, if you look back at my track record as a CEO, I think that you’ll find that while I look at a lot of things, I actually pass on most things…

That seemed to be enough to calm investor jitters prior to the keynote, but the Salesforce CEO had to hot-foot it from the main stage to address a financial analyst meeting immediately after and inevitably the elephant in the room packed its truck and followed him.

Faced with an audience clearly unconvinced of the merits of a Twitter move, Benioff repeated his position from the earlier interview:

We look at a lot of things. And we pass on almost everything. In fact, the number of things that we acquire is very limited and very few. Our process and our team is I think the best in the industry. I don’t think there is a better M&A investment team. We look at just everything, but we are extremely disciplined about what we do and how we buy, which is why on the deals where we acquire, the stock goes up. We are super-conscious of what any deal means to our shareholder or our stockholder. I think that our history and track record in acquisition is maybe better than anyone.

He added:

We look at everything. If someone is running an [M&A] process and they ak us to look at it, we are going to look at it. We’re going to conceptualise what we can do. We’ll evaluate all of our options. We’ll weigh it with our board of directors. We’ll talk to our financial analysts and get advice. We will think through everything.

Rumors

Benioff explained that the usual M&A process had been knocked off kilter on this occasion, something which clearly irritated him, noting that while the analyst community wanted a yes or no answer, they weren’t going to get one - “life’s not like that” - and stating:

I’ve heard the stories also. The thing that’s unfortunate about this is that usually when we are brought in to an M&A process, rarely do [analysts] even know about it. Obviously this time there have been big leaks around this process. That has been unfortunate because now we have to address it right now.

He was also adamant that having to discuss potential acquisitions in public is not a feasible way to operate:

I have no interest in going through my whole M&A pipeline and having [analysts] vote on it. It’s not appropriate. We should be able to run confidential processes with companies and look at those companies and make our own decisions. We can’t have one bespoke decision and have [analysts] come in and say, ‘Oh we don’t like this one, we like that one’. There’s lots of transactions that I’m thinking of, but I’m just not going to go through them all with you. It doesn’t work.

Salesforce has not agreed to buy Twitter, he stated, but added that it is a great brand and that he does view it as “an unpolished jewel”. But he stated bluntly:

We would never do the kind of deals that I’ve reading about. The kind of things I’ve been reading about have been so extreme, I’m like, ‘Jesus, do they really think that we would do a deal at that level?’. That said, we have to look at this. You have to look at everything. It gives us so many ideas, so many visions for the future. All the things we learn in these M&A processes is incredible.

He went on:

The only unfortunate thing is when it gets turned into the rumor mill. We have to look at every deal. If we were to do a deal like that, whatever it is, we would only do a deal if we felt that it was the right thing for our shareholders and stockholders and that everyone was on board and that we could explain how, why, when, where we’re going.

Benioff concluded by acknowledging that having to embrace the elephant in the room was unfortunate timing:

I'm sorry that this is a  dark cloud over the stock and over Dreamforce, but it is what it is.

And there was one last point that he wanted to make:

Result. Well done. Have a good drink once you're done with the main work. honest answer is, I’ve had more than 200 one-on-one conversations with customers [in the run up to Dreamforce]. Not a single customer has asked me about Twitter.

My take

A robust set of remarks from the Salesforce CEO. They're unlikely to get Wall Street off his back - at least until Twitter does find an owner - but at least he faced the scuttlebutt head-on.

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