Salesforce's Marc Benioff says he's following 'the Oracle playbook' to improve profits — and Larry Ellison is helping him

• Marc Benioff said he was adopting Oracle's playbook and being mentored by Larry Ellison as he focuses on profitability.
• Salesforce is under pressure from activist investors to improve its profit margins.

For decades one of the biggest insults employees at Salesforce could hurl about their company's culture was to say that it was turning into Oracle. But on Wednesday, Salesforce CEO Marc Benioff admitted that he was adopting Oracle's playbook and being tutored on it by Oracle's founder and chairman Larry Ellison.

"Huge call out to my mentor Larry Ellison, who has spent a lot of time with me giving me the Oracle playbook and I'm very grateful to him," Benioff said on a call with analysts after the company reported earnings when answering questions about improving profitability.

"He was the first person who texted me after the earnings came out today. And it's good to have friends in the world when things happen and he's been a great friend and we're executing that playbook to increase our margins," he said.

Benioff also praised Oracle's margins saying they have "best-in-class margins."

Salesforce has been under pressure from activist investors to improve its profit margins to 30% or better compared to the goal it presented in November: reaching 25% in a couple of years. That explains Benioff's newfound focus on profitability, and his new slogan that it's a "New Day" for the cloud software company.

Starboard Value, one of the activist investors targeting Salesforce, published a presentation after it announced its stake admonishing that the company has "not yet produced margins expected from its leadership position." And the investor particularly pointed to Oracle's and Microsoft's 47% 2021 operating margins, noting that they grew margins while also growing revenue.

In its earnings results Wednesday, Salesforce reported a 17% increase in revenue with adjusted operating margins of 22.5%. While that wasn't the Oracle-level profits, Starboard wants, it was a beat over what Salesforce had previously guided for the year: about 21%. Salesforce also beat expectations, and its own guidance, on revenue.

Hence the congratulatory text from Ellison.

However, the nod to the rival still came as a shock to anyone who is familiar with Benioff's and Ellison's long history. Over the last few decades, they've been everything from employee/boss to friends and business partners to rivals.

Benioff started his career at Oracle at age 23, and Ellison made him into a star executive by age 26. Benioff actually started Salesforce while at Oracle with more than Ellison's blessing. Ellison was an early investor in Salesforce and joined its board of directors. Ellison even offered to hire him back if Salesforce didn't work out.

The drama started when Oracle started working on a product that competed with Salesforce, eventually leading Benioff to kick Ellison off his board.

For years, they made their rivalry public, with much bashing of one another's companies, as Salesforce and Oracle grew into ever-bigger competitors.

But the animosity has cooled over the last decade, thanks in part to a strategic partnership inked in 2013. Salesforce is big Oracle customer.

And now Benioff is publicly thanking Ellison and his Oracle playbook as Salesforce fends off no fewer than five activist investors, all pressuring the company to improve profitability. One of them, the fearsome Elliot Management, is reportedly considering a proxy fight to put its own board members on Salesforce's board.

"The strength of Salesforce's business and its movement in the right direction are key reasons we are among the company's top investors, but much work remains: Salesforce needs a sustainable leadership plan and a board that demonstrates it can provide accountability through proper oversight," Elliott said in a statement to Insider.

To employees it's a sign of what many have always suspected, that Salesforce is actually heavily influenced by Oracle — with its famously highly competitive culture — despite Benioff touting that employees should see each other as 'Ohana,' a Hawaiian word for family. But employees say the heavy new focus on employee performance and profits, which is new to Salesforce, is taking precedence over its so called "Ohana" values.

"Salesforce is the new Oracle," said a former account executive who left the company in recent months because of what they viewed as an increasing level of performance pressure.