Wall Street’s hopes that the work messaging service Slack would be one of the few direct beneficiaries of the coronavirus crisis evaporated on Thursday, as the company issued cautious guidance about its near-term prospects and its shares plunged.
Stewart Butterfield, chief executive, said on a call with analysts that the company’s service was being used more actively by remote workers, but also warned of “potential hesitation” from new customers about paying for the service. “At this time we don’t have a clear idea of the net impact . . . on our business,” he said.
Slack’s wariness about its prospects wiped 20 per cent from its shares in after-market trading, after a fall of almost 10 per cent during the stock market rout earlier in the day. The slump was in stark contrast to the market fortunes of video conferencing company Zoom, whose shares have risen 60 per cent this year on a belief that many more people working from home, or WFH, will turn to video meetings.
Like Zoom, which reported earnings last week, Slack said it had seen a surge in users of the free version of its service in recent weeks as the pandemic has disrupted normal working. Both companies rely on attracting new users with a limited free service before selling a fuller version to their employers.
“The headline is, there’s just a massive outpouring of interest on the customer side,” Mr Butterfield said. He added that the initial interest “takes time to filter down” and translate into solid business deals, making it “difficult to predict” how much of the rise in traffic would turn into extra revenue for the company later on.
Concern that companies would delay purchases has made Slack more cautious in its near-term financial guidance while remaining more positive with its full-year forecast, said Allen Shim, chief financial officer. “We’re just trying to reflect a bit more uncertainty we’re seeing in the macro environment,” he said.
Mr Butterfield acknowledged that video conferencing services were a more direct beneficiary of the boom in working from home, adding: “In-person meetings are being replaced by video calls.” But he claimed that Slack’s group messaging service, which was designed to increase the productivity of teams of workers, would also benefit from the growth in remote working.
At $17 in after-market trading on Wednesday, Slack’s shares were changing hands about a third below the $26 at which they debuted on Wall Street in its direct listing last year.
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