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According to Salesforce’s most recent reports, MuleSoft’s revenue growth dropped to 16% in the third quarter from 49% in the first.
MuleSoft experienced “growing difficulties,” according to Salesforce officials, but will emerge stronger as a result.
MuleSoft is reportedly facing increased competition and higher employee attrition than usual.
At the beginning of the year, MuleSoft, the data integration business that Salesforce had invested $6.5 billion in and purchased in 2018, appeared to be paying off as it was Salesforce’s fastest-growing division.
However, that wager became less clear after Salesforce released its profits last week: Just 16% of MuleSoft’s $356 million in revenue increased from the previous quarter’s $39% growth and 49% growth of Salesforce’s fiscal year, respectively. MuleSoft, Salesforce’s third-largest acquisition to date and one of its slowest-growing divisions, became official with that sum.
Bret Taylor and CFO Amy Weaver, Salesforce’s recently appointed co-CEOs, acknowledged the delay in their remarks to analysts in response to the earnings release. They noted that MuleSoft confronts a number of “scaling problems” and that the business is creating plans. In response, adjustment was made.
Weaver added, “When a company grows as quickly as MuleSoft, you might run into scaling issues, and we had some of those challenges this quarter. Going forward, we are confident in the reforms we have made. While acknowledging that there may be short-term growing pains as we integrate our acquisitions, Taylor indicated that demand was robust and that “we are confident in the long-term business of the company.”
Despite the fact that neither executive provided specifics about how the growth pains would manifest themselves, Salesforce insiders speculate that they might at least partially stem from the ongoing Great Resignation. Beyond the remarks made on its earnings call, Salesforce declined to comment on this subject.
Even before the earnings call, JMP analyst Pat Walravens reported that a Salesforce partner had informed his business that MuleSoft and its sister firm Tableau were likely to undergo “organizational changes” and that both were struggling with “employees attrition – many people depart.”
The organization’s newly established “Data” business area is comprised of Tableau and MuleSoft. Salesforce paid $15.7 billion for the data visualization expert Tableau in 2019, making it the second-largest acquisition it has made to date, trailing only the $27.7 billion it spent for
Tableau, on the other hand, has had erratic revenue growth, with growth rates ranging from 22% in the second quarter of the current fiscal year to most recently 33%.
According to two former senior executives of Salesforce, there has been a high rate of staff turnover, especially at its subsidiaries MuleSoft and Tableau. An executive at a systems integrator company that works with Salesforce told Insider that this has recently been particularly apparent with MuleSoft’s sales force.
MuleSoft has also experienced noteworthy senior departures over the past year, including CEO Simon Parmett in October 2020, CTO Uri Sarid in February this year, and chief marketing officer Lindsey Irvine most recently, who left in September.
Although it’s unclear what might be causing a rise in MuleSoft customer churn, a former Salesforce executive notes that the company has recently passed the two-year mark since its purchase, which is the customary period when workers of an acquired company are allowed to join. MuleSoft experiences what are frequently referred to as “golden handcuffs,” as their shares vest.
MuleSoft’s CEO said to Insider following the earnings release that the company is also dealing with a more challenging competitive environment than before. The director said that while MuleSoft’s offering is powerful, similar services for transporting data between business programs are also provided by smaller firms like Workato and SnapLogic, Microsoft, and Amazon Web Services, often at cheaper costs.
There may be “some friction” with the larger Salesforce entity’s concentration on selling cloud software hosted from its own data centers, according to JMP’s Walravens, who also points out that MuleSoft is successfully selling more conventional software that clients may install on their own servers. This, together with the fact that Salesforce typically charges clients based on the number of users, whereas MuleSoft bills customers based on their actual usage, could present a “challenge” to marketing and sales teams that are motivated to sell both together.
With earnings of $1.27 per share on revenue of $6.86 billion, Salesforce’s overall quarterly earnings report topped Wall Street projections. However, it also provided forecasts for subsequent quarters that were below analyst expectations. Executives, meanwhile, are still upbeat about Salesforce’s potential.
Thanks to our new business strategy, fresh management, and an ever-evolving product range, we enjoyed another outstanding quarter, according to Taylor.
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