Salesforce.com To Cut 200 Jobs Despite Its Expectations To Make More Money

Dawn Kawamoto writes "Sometimes, making more money is not enough. Just ask Salesforce.com. The SaaS company announced it would cut 200 jobs, during its second quarter earnings call. The cuts are coming, despite the company raising its revenue forecast for its fiscal year. Salesforce.com says it's initiating the cuts to reduce overlapping roles and to (you guessed it) gain 'synergy', following its effort to meld its cloud marketing platform company ExactTarget with its social media market suite Marketing Cloud. And apparently this isn't the first time Salesforce has tried to squeeze out those nebulous 'synergies.' It reportedly cut 100 jobs in October, when it merged its social media platform companies Radian6 and Buddy Media."

Comments

Business tries to increase profits, new at 11

[Logger]

Given they are not a charity, I don't see the issue. Maybe they have 200 people just fetching coffee that they just realized don't really contribute to the company. Layoffs are often a way to gid rid of dead weight.

Re:Business tries to increase profits, new at 11

[gfxguy]

Agree... the most profitable companies in the world don't employ people just to keep them employed, the employ the workforce they need. Just because earnings go up doesn't mean they require the workforce they had.

Re:Business tries to increase profits, new at 11

[i kan reed]

But with the special caveat that more tax cuts on those profits will make them hire more people.

Re:Business tries to increase profits, new at 11

[Anonymous Psychopath]

Exactly.

It's sad to see that Slashdot has become such a set of Corporate worshipers. Every cut, no matter how ridiculous it may be, brings out an army of people that say BULLSHIT like the O.P. here.

In less than a week there will be a whining post about how corporations can't get good help. Well, maybe you firing them after they help you succeed is part of the problem.

Hint: a lot of you people are taking corporations as if they have been handed down by God. They aren't.

The problem isn't finding people to hire. Unemployment rates show there's plenty of warm bodies around. The problem is finding people with skill sets and costs aligned to what the business needs. This isn't some sort of emotional worship of business. That's how trade worked before we invented currency.

Re:Business tries to increase profits, new at 11

[turgid]

What usually happens is that the company does reasonably well inspite of it management, and that fact that it's making a profit is a "signal" to the geniuses at the VP level and above that they obviously have too many staff, so they make cutbacks, forcing the remaining staff to work harder and longer hours unpaid (evenings and weekends and such like) to get things done.

Meanwhile, the remaining staff get their CVs out and leave. Then things start to go wrong, deadlines are missed, quality plummets and customers get angry, demand money back, freebies and even start to sue.

Next, that part of the company gets closed down with the loss of all jobs but the "intellectual property" goes elsewhere.

Meantime, since the cost base has been further reduced, the VPs get a bonus and the share price goes up.

Re:Business tries to increase profits, new at 11

[Xest]

Especially the comment near the end about cutting jobs when they merged two companies.

I mean what, is whoever wrote that piece of turd suggesting that if you merge two companies you should just retain two HR departments, two finance departments, or merge them and have one big bloated oversized mess?

If anyone thinks you should keep all jobs when you merge two companies then they're kind of missing the point and wont get very far in life. Merging companies or even departments to cut redundancy is a standard way of increasing efficiency. I mean what, are you supposed to have two receptionists sat on front desk filing their nails instead of just one? Two IT managers fighting over power of one network? Two CEOs fighting over the best way to run said company? Two janitors so you can have the toilets cleaned twice as fast leaving them nothing to do for the rest of the day?

Re:Business tries to increase profits, new at 11

[h4rr4r]

Those are two different things.

If a company could expand it would. Tax cut or no.

I am not refuting that, merely pointing out that supply side economics does not work. No one will hire more people because they have extra money, extra money is called profit.

Re:Business tries to increase profits, new at 11

[Crosshair84]

Hairyfeet, seriously.step away from the keyboard because you're doing nothing but making yourself look stupid. You have your areas of expertize, but you know effectively nothing about economics and even less about history.

The "age of the robber barons" saw the standard of living of the average worker rise faster than at any point before or since. Sure conditions were poor for the workers in the factories, but that was because society itself was too technologically primitive to produce the goods we have today.

How about I sit you in front of a PC from 1988 and have you do your job from that computer? Would you lament about the poor condition of the PC world from that era as the result of "the age of unfettered capitalism" and attribute to today's PC world to the result of government regulation? Or would you recognize that things were that dismal and primitive because that was the best that-they could do at that time given the technology available to them?

Were things "primitive" on Gilligan's Island because Thurston had all the money? Or was it because the capital equipment to produce the goods that they were accustomed to did not exist on the island? If they took all of Thurston's money and distributed it to everyone else would they be better off in any way? Standards of living rise because productivity per worker wises, which is the result of capital investment and accumulation, not by redistributing money.

The "collusion and market rigging" are myths. The price of steel, kerosene, and other goods that the "robber barons" ruled during the latter part of the 19th century saw production skyrocket and prices FALL. Rockefeller brought the price of Kerosene down around 90%. Sure he drove a great many of his competitors out of business, but the average person benefited by now having a cheap fuel for illumination. Any attempts at collusion quickly fell apart because in a voluntary cartel, someone will soon start cheating and the whole system falls apart. Only TWO cartels have had any lasting impact or power without government support, the DeBeers diamond monopoly and the New York Stock exchange. Even OPEC can't permanently affect prices because all the member states have cheated on their quotas at one point or another. (BTW, the 1970's oil crisis was caused by US government price controls on oil, not OPEC. Had prices been allowed to rise slightly there would have been no shortages.) It is only by an overarching central government that cartels can last for any length of time.

As for violence against the workers, when you take stuff that isn't yours, I would hope that someone comes to crack your skull. Frequently, as in the Homestead strike, the workers had taken property that wasn't theirs and were the ones who first opened fire on the Pinkerton agents, whose assigned task was to simply secure the factory for the owners.

You also neglect the violence brought upon workers by the labor unions. Workers whose only crime was accepting terms of employment that the Union workers had rejected. If you won't fix PCs for less than $35 an hour and I will do it for $30, what right do you, or a Union, have to prevent me from freely agreeing to a contract that you, or the Union, had rejected?

Problems like company housing and the company store were temporary problems, partially resolved by the invention of the safety bicycle and completely solved by the mass produced automobile, which gave workers the ability to chose from dozens of employers instead of just the one within walking distance.

Nobody bothers responding to you on these issues anymore because these facts have been pointed out to you repeatedly and yet you continue blathering on as if nothing has happened. I really need to set up a "copy/paste" to use because your arguments NEVER change no matter what evidence is provided. (and I HAVE given far more detailed responses to you.) You blame religious folk for being closed minded. How about taking a little look in the mirror?

Why is this news?

[poet]

SalesForce is a company. Their job is to make money for their share holders. If the management decides that they have overlapping roles then it makes sense to retire those roles. I am sure they have a policy to hire within first, people can always reapply if they like working for the company.

Re:Why is this news?

[radiumsoup]

because if it's presented at news, then the anti-corporate knuckledraggers can spin their Wheel of Blame to point to the "story" as an example of [insert result from wheel of blame here].

This week's spin seems to have landed on "greed".

Re:Why is this news?

[Mad Bad Rabbit]

SalesForce is a company. Their job is to make money for their share holders.

That attitude has been destroying the U.S. economy since the 1970's. The priorities of any sane company should be:

1. Provide a good or service that delights customers
2. Make enough money doing it to pay your vendors and employees fairly
3. Reinvest most of the profits in ways that will provide long-term benefit (capital upgrades, employee training, etc.)
4. If you are publicly traded, pay shareholders just enough that they don't dump your stock

If SalesForce were focused on the first three, then unless they're already at 100% market saturation, they could find profitable new tasks for those workers.
They have chosen not to, because "shareholder value" is more important to them.

Re:Why is this news?

[bluefoxlucid]

New technologies like what? Getting other businesses to hire more people than they need and create more redundant jobs in other sectors?

Re:Why is this news?

[chihowa]

Because if I pursue the first three options, I'll be probably be around (and still profitable) after next quarter.

To turn it around, why do I want you to invest in my company if you're going to bail after one quarter or pull your investment after one poor quarter? Maximizing shareholder returns is not a successful long-term strategy for profitability.

Revenue is not the same as earnings

[ugmoe]

Revenue is not the same as earnings Full Year FY14 Guidance: Revenue for the company's full fiscal year 2014 is projected to be in the range of $4.000 billion to $4.025 billion, an increase of 31% to 32% year-over-year. GAAP net loss per share is expected to be in the range of ($0.44) to ($0.42) while diluted non-GAAP EPS is expected to be in the range of $0.32 to $0.34. The non-GAAP estimate excludes the effects of stock-based compensation expense, expected to be approximately $511 million, amortization of purchased intangibles related to acquisitions, expected to be approximately $146 million, and net non-cash interest expense related to the convertible senior notes, expected to be approximately $47 million.

Re:Revenue is not the same as earnings

[Xaedalus]

They borrowed a hell of a lot of money, are trying to keep within their debt covenants, and need to make good on the compensation packages. Growth has been great for them, but my guess is that they've reached the limits of easy explosive growth and have now matured their market segment. While non-GAAP is all fine and good, GAAP is what the Street and investors look at. So if they're projecting to lose -$0.44 a share, then yeah, they're going to have to downsize in order to reduce expenses to the point where they eliminate that loss going forward.

Aquisitions

[SpaceMonkies]

Look at their aquisitions:

Sendia (April 2006)[8] – now Force.com Mobile
Kieden (August 2006)[9] – now Salesforce for Google AdWords
Kenlet (January 2007) – original product CrispyNews used at Salesforce IdeaExchange[10] and Dell IdeaStorm[11] – now relaunched as Salesforce Ideas
Koral (March 2007) – now Salesforce Content
Instranet (August 2008) – now re-branded to Salesforce Knowledge
GroupSwim (December 2009) – now part of Salesforce Chatter
Informavores (December 2009)[12] – now re-branded to Visual Workflow
Jigsaw Data Corp. (April 2010),[13] – now known as Data.com
Sitemasher (June 2010) – now known as Site.com
Navajo Security (August 2011)[14]
Activa Live Chat (September 2010) – now known as Salesforce Live Agent[15]
Heroku (December 2010)[16]
Etacts (December 2010)[17]
Dimdim (January 2011)[18]
Manymoon (February 2011) – now known as Do.com[3]
Radian6 (March 2011)[19]
Assistly (September 21, 2011) – now known as Desk.com[20]
Model Metrics (November 2011)[21]
Rypple (December 2011)[22] – now known as Work.com
Stypi (May 2012)[23]
Buddy Media (May 2012) for US$689 million[24][25]
ChoicePass (June 2012)[26]
Thinkfuse (June 2012)[27]
BlueTail (July 2012) – now part of Data.com[28]
GoInstant (July 2012) for US$70 million [29]
clipboard.com (May 2013) for US$12 million [30]
ExactTarget (announced June 4, 2013) for US$2.5 billion[31]
EdgeSpring (June 7, 2013)[32]
-- http://en.wikipedia.org/wiki/Salesforce.com#Acquisitions

I can see why they need to 'reduce overlapping roles'!

Check out the new Slashdot iPad app

dead weight

[schematix]

It is quite normal that after a company has grown and hired more and more employees, that the time comes to get rid of those employees who didn't contribute the value that they are paid for. As uncomfortable as it is for someone to lose their job, most of the times it's not the productive people who are being let go - it's the dead weight. Truly good employees are hard to come by so if you happen to just be in the wrong place at the wrong time then it sucks, but you won't have a hard time finding a new job. Even in a less than stellar economy really good talent is always in strong demand. If you are incompetent, all bets are off and good luck to you.

Re:Synergy

[SJHillman]

Which is sometimes still better than giving several people the job of one person.

Re:Go ahead

[LordLimecat]

If they are making money and can continue to deliver their product while reducing workforce, by what possible logic would you justify keeping on redundant jobs?

Might as well just donate the money to the workers if you wanted to do that, and call it the charity that it would be. Businesses exist to make money and provide a product, not to create jobs-- get over it.

Re:These 200 jobs:

[alen]

what part of social media marketing don't you understand?

these are the guys who buy data from facebook and linkedin and then pester you to buy crap

Corporate Welfare

[Tridus]

This has been making a lot of news in Eastern Canada, because Salesforce (who bought local company Radian6) got a payroll grant from the government to go out and create 300 jobs with. ...

So naturally they cut a bunch of other jobs. The government has been scrambling ever since to not look like total morons for giving them money at all. Which is good, because corporate welfare schemes are always a ripoff for taxpayers and the only way it'll ever stop is if politicians start to get embarrassed for doing it.

Re:Corporate Welfare

[Anonymous Coward]

This has been making a lot of news in Eastern Canada, because Salesforce (who bought local company Radian6) got a payroll grant from the government to go out and create 300 jobs with. ...

I so dearly love when people (especially politicians) immediately make statements like that, implying that a company received a ton of money, without actually checking, you know, facts? If one bothers to read the news, it will become clear that _no money_ has been given at all. This is a grant based on various conditions, the essence of which appears to be that 300 long term jobs are created (and maintained) in New Brunswick over the next five years. It is actually still likely that those goals will be met, but if they are not, no government money will be spent. Source: http://www.cbc.ca/news/canada/new-brunswick/story/2013/08/29/nb-salesforce-radian6-job-cuts-1111.html

Disclosure: This is my personal comment, I work for Radian6 as a techie, but I have no actual knowledge of any financial details, beyond what I can read in the news like everyone else.

Re:Go ahead

[penglust]

I mostly agree with you but just a couple of points.

1. Whenever a company uses the word "synergy" it make me believe they are using marketing hype and really don't have a clue if what they are going to try is the right thing or not.

2. If they really did not need them then why did they hire them in the first place? This hire - fire mentality really does just make companies look incompetent.

3. Its just a company to help dip shit salesmen darken my door so who really gives a shit anyway.

Re:Go ahead

[IANAAC]

Whenever a company uses the word "synergy" it make me believe they are using marketing hype and really don't have a clue if what they are going to try is the right thing or not.

Just once, I'd love to hear someone ask "What exactly do you mean by 'synergy?'" during one of these earnings calls, then listen to the hilarious, stumbling response. The word's been overused so much that it's lost its meaning.

Re:Go ahead

[JackieBrown]

2. If they really did not need them then why did they hire them in the first place? This hire - fire mentality really does just make companies look incompetent.

Most companies evolve and spots are no longer needed or new ones are. If they didn't do this, they would be critiqued for not keeping up with the changing landscape.

We mainly hire contract workers for our call center now so that we could avoid the hire-fire press.

There is a cost to hiring and firing people and most companies don't just do that on a whim. My job trains people for 4 weeks before even letting them talk to a customer. It takes several months to recoup the cost for just training. When we fire someone or reduce ("right-size") our workforce, there is a lot of cost to that as well (most obvious being unemployment benefits.)

Re:Go ahead

[tnk1]

I agree with your point.

I would say, though, that it might be nice or useful to see if they can make use of some of those employees for internal positions that will be opening up as Salesforce grows. I realize, this is not going to be possible for some, or even most of those jobs, but it is also an efficient practice to keep people on who you don't have to go through the full hiring process to locate and vet.

Re:Go ahead

[runeghost]

1) Morale 2) Loyalty 2) Because it's cheaper in the long run to keep experienced staff around for when you do grow. Businesses exist because we, the body public, choose to let them exist in order to provide a net positive contribuition to our society. Any business that has no reasonable expectation of being good for society, now or in the future, should be eliminated.

Revenue is not profit

[mc6809e]

Revenue is not profit. It's entirely possible to increase revenue while losing increasing amounts of money.

While I'm at it:

Wealth is not income.

"Literally" isn't for emphasis.

Feel free to add to the list.

Re:Go ahead

[Archangel Michael]

Synergy means "getting more from what you have". It doesn't require cutting as a result. In fact, the two are not even related, directly. However, because you can do more, you might not need those people any longer. It happens.

This is a non-story.

Re:Go ahead

[Anonymous Coward]

How many of the 200 chosen will be the ones with higher salaries and only 2 years to go until retirement?

WRONG - Tried of this

[brunes69]

This was covered in detail already the last time this happened. Payroll rebate programs have clauses to protect against this. They only get the money when they make their hiring numbers. They have not made those numbers so have not gotten a dime.

These layoffs suck for the region and I have close friends who have been directly affected, but mis-reporting the situation with false truths helps no one.

Companies are not job-creators

[asylumx]

I've said this before. Companies are not in business for the sole purpose of creating jobs. Creating jobs is a side effect of doing business. This business, as other commentators have pointed out, is eliminating unnecessary workforce because it will make them run more cleanly and ultimately end up with more profit. This should be indicative of what is likely to happen if you cut taxes for businesses -- they will add that money to their bottom line, but will continue only to hire new workers if they need to. That's why I don't buy it when politicians claim that corporate tax breaks will create jobs.

I know I'm off topic, and I don't think Salesforce.com is doing anything wrong here. Just sick of people claiming tax breaks will fix the economy.

Re:Go ahead

[Zero__Kelvin]

"The replies so far are kind of making my point: The word means whatever the person using it wants it to mean, whether it's a standard dictionary definition (not really helpful ..."

Well, if you live in a world where definitions in the dictionary don't mean anything, and anyone can make up whatever they want for a definition, then you are correct. Personally, I live on planet Earth.

"That said, I don't believe the word "synergy" and Salesforce's actions (the many, MANY acquisitions they've gone through being an example) match up."

They have two divisions which they are merging. They are eliminating redundant positions as well as overhead so that their cash outflow is reduced. Assuming they continue to be as profitable, how does that not fit the definition?

Re:Go ahead

[zlives]

so you fire half of them and make the other half pull ~1012 lbs, yup sounds like time to raise revenue forecast...

yayyy

Re:Go ahead

[nine-times]

I keep trying to tell people: Companies don't just look at how much available money they have and say, "Hey, we can hire more people!" They look at the base minimum of people they need to employe before they can't provide their service (or manufacture their product), and they hire that many people. They make their profits by *not* hiring more than they need to.

And I don't point this out to defend the behavior of businesses. I point this out so that people understand the fault in the logic when they're told, "The best way to boost the economy is to give tax breaks to 'job creators'." You give more money to 'job creators' and they pocket that money. They don't suddenly hire more people because they have money.

Re:Go ahead

[davester666]

I believe the kind of synergy they were talking about increasing is the synergy between salesforce.com's bank account and the ceo's and other top executives bank accounts...

Because only they would think of firing people while the business is growing.