Does Slack have a chance to go against the wind?
Editor’s note: This article is from the WeChat public account “US Stocks Research Institute” ( ID: meigushe).
On September 5, Slack released its second-quarter earnings for the 2020 fiscal year. The data showed that its revenue grew year-on-year and its losses increased year-on-year. Specifically, revenue was $145 million, a year-on-year increase of 58%. The loss attributable to ordinary shareholders was US$360 million, an increase of 12.5% year-on-year. Slack, a well-known mobile office software, surged 49% on its first day of listing this year. However, affected by this financial report, its share price plummeted 13.71% as of September 5th.
Slack currently faces two major problems. One big problem is competition from rivals such as Microsoft. Although Slack is developing rapidly, compared with giants such as Microsoft and Amazon, there are still many shortcomings, especially under Microsoft’s free offensive. Declined. Another big problem is the cost. From the financial report, we can see that Slack’s cost is rising rapidly, which may continue to drag down its revenue performance.
However, Slack also has its own advantages. On the one hand, through application integration, Slack’s office ability is not weaker than Microsoft, and even better in some aspects. On the other hand, the SaaS industry is booming in recent years, and the market space is large. Even if faced with competition from rivals such as Microsoft, there is still much room for development before the market is saturated. Not only foreign countries, domestic nail applications, WeChat, Feishu and other mobile office applications have been developing rapidly in recent years. The US Stock Research Institute will continue to pay attention to the development trend of this industry at home and abroad.
The growth in revenue growth is widening, and it is difficult to achieve profitability due to the increase in paying users
From the perspective of revenue. In the second quarter of Slack 2020, revenue was $145 million, a 58% increase from the $92 million in the same period last year. Slack has three modes: free, paid, and value-added. The subscription fee for enterprise users is the main source of income. In the second quarter, due to the growth of corporate paying users and the expansion of market size, Slack’s revenue showed a rapid growth.
From a profit perspective. In the second quarter of Slack 2020, the loss attributable to ordinary shareholders was $356 million.soft. The Teams chat application in Microsoft’s Office 365 business subscription has become the biggest enemy of Slack, and Slack has a big gap with Microsoft. On the one hand, Microsoft is a software giant, technically and financially rich, and on the other hand, Microsoft office business matures. Teams bound to the office business are more popular with users.
Microsoft currently has the upper hand. Not long ago, Microsoft announced that its Teams daily user 13 million surpassed Slack. The number of daily users exceeds 13 million, and the number of users using Microsoft Teams per week is more than 19 million. More than 500,000 organizations and businesses use this service for internal communication and communication. From the previous analysis of the number of users, it can be seen that Slack has lost a little. In addition, due to Microsoft’s suppression, the development trend of Slack is not clear, which may become a major risk for its development.
Analysts believe that Slack and Microsoft are in a duopoly mode. KeyBanc Capital Markets analyst Brent Bracelin said, “We believe that Slack and Microsoft’s team can form a duopoly market structure around the two most popular information-centric platforms.” However, there are currently many competitors in the mobile office. Outside of Microsoft, Amazon and Facebook all have related businesses, and Amazon has even had the idea of acquiring Slack. The environment facing Slack is still not impressive, and there is still a long way to go to form a duopoly.
Slack still has certain advantages. Survey data shows that Slack is still the most widely used enterprise chat tool in general. 65% of the companies surveyed use it. 61% chose Skype for Business and 59% chose Microsoft Teams. However, both Skype for Business and Teams belong to Microsoft applications. The competition between Slack and Microsoft has just begun.
(2) Slack costs are growing at a high speed, or continue to drag down earnings performance
The financial report shows that the cost of Slack is growing rapidly. Slack’s second-quarter total operating expenses were $477.5 million, compared with $114.3 million in the same period last year, an increase of 3177% year-on-year, about three times more. Among them, R&D expenditure was US$217.8 million compared with US$35.2 million in the same period last year; sales and marketing expenses were US$136.4 million, compared with US$53.6 million in the same period last year; general and administrative expenses were US$123.4 million, compared with US$25.6 million in the same period last year. .
Slack’s cost increase is hard to avoid. As the number of users grows, Slack’s operating costs are also growing at a high rate. At the current growth rate of users, its cost will continue to grow at a high speed. In addition, in order to deal with Microsoft and get more users, Slack had to set up a marketing department, which led to a lot of marketing costs. Last moveThe upgrading of office services is fast, and enterprises are increasingly demanding applications, which will lead to an increase in research and development costs. Therefore, the cost of Slack will continue to grow, which will continue to affect his profitability.
Integrated applications expand the ecological scope, and the SaaS market develops rapidly
The biggest difference between Slack and Microsoft is that the Slack business model is simple. Microsoft has extensive experience in the office field and many products, but it is also a major drawback. Slack can work with other office service providers to share the market through applications, but Microsoft must pay more attention to the marketing of its own products. Therefore, Slack has a greater ecological advantage in the application. And although the two are in a competitive situation, the SaaS industry is still in a period of vigorous development. The competition between the two is not a struggle between life and death, which will give Slack a certain development space.
(1) Slack integration application expands scope, ecological construction is slightly ahead of the competition
Slack’s compatibility is already at the forefront of the industry. According to Tencent Technology, Slack is compatible with more than 100 third-party communication or office collaboration software. It combines chat group, tool integration, file integration, and unified search to help users easily aggregate information in their work scenarios. From the perspective of application integration, Slack integrates more than three third-party applications and services, and Microsoft Teams only integrates 180 third-party applications and services. Therefore, from the perspective of compatibility, Slack’s advantage seems to be even greater.
And, Microsoft may have difficulty expanding compatibility. For Microsoft, users are more likely to use their own office office software. Although the office does have advantages in many aspects, it greatly limits the flexibility of Teams. And Microsoft can’t access more third-party applications like Slack to reduce the market share of the office. However, the office also has some help for Microsoft to promote Teams, because many companies have already purchased Microsoft business such as office. Accepting Teams will result in a higher degree of fit.
(2) The SaaS market is exploding, and Slack still has a lot of room for development
The SaaS market and collaborative office space are growing rapidly in recent years. This will give Slack a good development opportunity. According to the forward-looking industry research institute, SAAS (software operation service) industry market prospects and investment warfareThe statistics of the slightly planned analysis report show that by 2020, the global SaaS market will reach 73.73 billion US dollars, an increase of 16.74%. Although there are many opponents on the track, the industry is still in the early stage of development, and Slack still has great opportunities for development.
The current foreign track is mainly Microsoft, Slack, Amazon and Facebook, of which Microsoft and Slack have the highest market share. Domestically, it is mainly nailed, but WeChat is also intervening in this market, and there are many companies pouring into this track. The appearance of flying books is proof. However, although the market is large, it is not easy to survive, and the pressure from the giants is still very large.
Overall, Slack’s financial statement is not good in the eyes of the capital market. In the competition with Microsoft, the cost problem is even more severe. However, Slack may not have the opportunity to turn over. In terms of ecological construction, Microsoft is trapped in its own business, not as good as Slack in terms of compatibility and flexibility, and the SaaS market has yet to be developed. But whether Slack can withstand the pressure to rise against the trend is not known, the US stock research society will continue to pay attention to his follow-up performance.
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