‘Big Short’ Investor Burry Attacks Software’s Massive Sales Force
Software giant Salesforce’s recent revamp confirms the widespread struggles in Silicon Valley and technology in general.
In an effort to cut costs, customer relationship management systems specialist (CRM) – Get a free report on January 4th revealed a vast restructuring plan. including mass job cuts, downsizing of office space and withdrawal from some real estate markets.
Insights: Salesforce will close some offices and lay off about 10% of its estimated 56,600 employees as it looks to reduce operating costs, expand operating margins, and “continue to push the envelope.” drive the company’s ongoing commitment to profitable growth.”
Salesforce said the job cuts, as well as broader restructuring plans, will cost between $1.4 billion and $2.1 billion, with a loss of about $1 billion expected in the quarter. Finance IV.
“The environment remains challenging and our customers are taking a more cautious approach to their purchasing decisions,” said CEO Marc Benioff Written in a letter to employees explaining the job cuts.
“With this in mind, we have made the very difficult decision to reduce our workforce by about 10%, mostly in the coming weeks.”
“I’ve been thinking a lot about how we got to this point. As revenue We got through the pandemic quickly, we hired too many people that led to the recession we’re facing, and I’m responsible for that.”
‘CRM should be down 25%’ — Burry
The announcements have been welcomed by the company’s investors. Salesforce shares rose 3.6% to $139.59 in January 4 trading.
But there is one investor who is not convinced or reassured. He said Salesforce should have been launched after the announcements.
This investor is none other than the legendary Michael Burry, who is famous for his big bet on the collapse of the US real estate market that led to the 2008 financial crisis.
Here’s what he just learned via a malicious tweet:
“CRM should have dropped 25% due to job cuts.”
He went on to say that job cuts are not a reason to add or keep Salesforce stock in your portfolio.
“A job cut is no reason to own that thing,” he added without elaborating.
Investor, operator hedge fund Scion Asset Management, a few months ago, predicted a routine in the tech sector marked by a wave of mass layoffs of white-collar workers. The news cycle proved him right as most tech groups are relying on job cuts to adapt to the recession.
Example: Meta . Platform (META) – Get a free reportFacebook’s parent company, WhatsApp and Instagram, cut 11,000 jobs in November, the first time since the group was founded in 2004. Amazon (AMZN) – Get a free report just announced that it will cut 18,000 jobs, much higher than initial estimates.
Unsurprisingly, Burry’s criticism generated many comments on Twitter. Some commentators point out that job cuts are good for the software giant. bottom current.
John S. Boyd, CEO of Monolith Technologies, commented: “They don’t generate revenue – they go straight to net income”. “Stocks should go up.”
“Bad bet Burry. Cutting jobs just creates more efficiency and more returns for shareholders. I don’t own any CRM but you know what I’m saying,” another Twitter user said. said more.
But other Twitter users agreed with Burry and questioned the effectiveness of the cost-saving measures on Salesforce’s future performance.
“CRM has been in a recession for years. Competition is catching up, along with the market going down,” agreed one Twitter user.
“It’s surprising that these big RAT companies are going to go into mass layoffs that won’t affect operations. It’s amazing that they just woke up after C19 and they all did it at the same time. maybe so they won’t be seen as ‘what do you mean?’,” another Twitter user said.
Burry has a solid track record
Burry usually does not and here does not respond to comments.
For the third quarter, Salesforce reported Wall Street’s best profit of $1.40 a share as demand for its workflow solutions remained steady. Revenue grew 14% year-over-year to $7.84 billion, essentially matching analyst estimates.
The company’s remaining performance obligation, a sum of total deferred revenue and product backlog and a key industry metric, rose 11% to $20.9 billion.
The 2008 financial crisis, one of the biggest financial crises in history, made Burry a legend. It made him one of the role models in challenging standard practices in the financial world.
The 2015 film “The Big Short” depicts how the investor, who has no particular expertise in finance and real estate, understands that the field has become a sandcastle. Financiers and bankers have created exotic products based on mortgages for financially disadvantaged households and borrowers with poor credit.
So he decided to bet on the collapse of the subprime mortgage market — hence the name “Big Short”. History has proven him right. Since then, Burry has become a seer on Wall Street.