WHEN: Today, Wednesday, March 1
WHERE: CNBC’s “Squawk on the Street”
Following is the unofficial transcript of breaking news from CNBC’s David Faber on CNBC’s “Squawk on the Street” (M-F, 9AM-11AM ET) today, Wednesday, March 1st. Following is a link to the video on CNBC.com:
All references must be sourced to CNBC.
DAVID FABER: Welcome back. Of course, a lot of investors will be focused on Salesforce earnings that will come after the bell tonight not just to see the financial progress that that company is making, but also because wondering whether in fact there will be anything associated with that that does meet some of the hopes and dreams of the various activists who’ve been in the stock. It’s a story we’ve been following for some time, of course, a long roster of activists, led in part by Elliott because when it comes to Elliott, as I’ve said it appeared for a while that they were at loggerheads and then for a while closer to a settlement. What I can tell you now is that Elliott has nominated a slate of directors—
JIM CRAMER: Oh, really?
FABER: For Salesforce’s board. Yeah, yeah. Elliott has nominated now, many people not may not be surprised at that. We’ve been talking about this as a possibility for quite some time. The nominating window by the way closes on the 14th of March so still a couple of weeks from now. Unclear if it’s two or three nominees, likely to include Jesse Cohn of course, who runs the activist practice at Elliott, not been able to find the names though and can’t confirm in fact even that Cohn is a part of them, although that is expected by a number of people who at least are close to the situation. But again, can’t necessarily confirm that. Now, only about two weeks ago I was reporting that the two sides seemed very close to a settlement. And in fact, based on the reporting I had at the time, it appeared that they might get to one in the near term, even perhaps before earnings were released later today, that clearly not the case. And the question then becomes well, will Salesforce, a company its earnings released tonight with language that in some way meets the hopes that and the the ask that has been out there from any number of these activists started with Starboard Value of course and Jeff Smith in a CNBC interview last fall, indicating hey, this is a company that should be a lot more profitable than it is.
CRAMER: But you see these guys?
FABER: Yes.
CRAMER: They’re going to they’re going to back Marc tooth and nail. They’re going to just back him.
FABER: Well, you know, to your point there are three new directors who are being added today.
CRAMER: Right.
FABER: Arnold Donald joins the board, Sachin Mehra and Mason Morfit from ValueAct, an activist have joined the board it’s 13 members, but it is very conceivable at this point that they will be facing a proxy fight. It doesn’t mean that will happen. And again, I would point people to tonight’s earnings release and whether or not we get language associated with it that perhaps details hopes, Jim, that they do get to 30 to 35% margins as soon as possible is the hope of the activists here because incremental margins become very significant when you cut costs, they have begun cutting costs. Marc Benioff has talked about a focus on margins ahead of revenue growth, that has been embraced by the activists. And there’s a hope that they don’t backslide. So certainly we’re going to focus on the earnings tonight not just to see the report card on the progress the company’s making, making in terms of its profitability, but whether it includes with that some of the things the the activists have been looking for, but this certainly brings up the prospect of a proxy fight in their future. Elliott would not have nominated if that was not a possibility. They do have a multibillion-dollar stake, that includes a lot of swaps and options. So Salesforce may tell you well, they’re not even near the closest share, largest shareholder of the activists in our stock because they don’t have that much common but this is the way they do it and of course, if and when they needed to vote those shares, they could do so.
CRAMER: How upset are they with Benioff. Oh my god, that’s the equivalent of saying you’ve got to step down.
FABER: Why.
CRAMER: Well step up to a less, Larry Ellison position.
FABER: You know—
CRAMER: Because I thought that they, I thought they had reached some sort of—
FABER: Jim, I was, you know, again, I reported a couple of weeks back that they were very close to a settlement—
CRAMER: Naming a director—
FABER: My understanding was at the time that there had there sort of there were two directors, potentially going to join the board and a number of different things the company was going to say to to settle with Elliott. They didn’t get there, they didn’t get there and clearly, whoever these directors are that have been nominated by Elliott they are not being met with well met by by Salesforce. It was clearly saying no, we’re willing to fight. Now—
CRAMER: Could this be a Peltz, Disney where you do the quarter or—
FABER: Yes, could be a situation where perhaps Elliott sees language that they like tonight that accompanies this earnings report and they say okay, we’ve done what we needed to. By the way, there has been an ongoing dialogue between Salesforce and Starboard, Salesforce and Third Point Dan Loeb, Salesforce and Elliot that’s been going on for weeks and weeks at this point.
CRAMER: Well, Marc has been very receptive. They like the product. Marc was saying to you hey, listen, I’m excited to talk to these people. Maybe they have good ideas. He’s not in any way saying they have no good ideas.
FABER: No. I mean, the way it’s been characterized by me is good faith conversations.
CRAMER: Yes.
FABER: But it did seem to me more recently that those good faith conversations were going to lead to peace. That is clearly no longer the case. Where it leads is still unclear. You know, and to your point in the past, you know, Elliott is not talking to a proxy fight with PayPal, but they ultimately got what they were after. They didn’t go to a proxy fight with Pinterest, but they did get a board member in fact, an Elliott employee, Steinberg is on the board of Pinterest so you can have settlements that are non-settlements so to speak without a proxy fight.
