Zoom may be synonymous with online calls but it is far from the sole provider © (c) Cateyeperspective | Dreamstime.com

Everyone has Zoom fatigue — even market participants. The San Francisco-based video-calling service has been one of the tech sector’s rocket stocks this year, with its share price soaring almost 600 per cent. An expected return to offices in 2021 has led to it forecasting falling growth in its latest results. That led the stock price to drop 5 per cent in after-hours trading on Monday. But problems at chat app Slack, a fellow work-from-home star, are more worrying. 

Like Zoom, Slack listed on markets in 2019 to great fanfare. Like Zoom, Slack’s metrics rose in the pandemic as offices emptied and workers communicated remotely. Sales and user numbers surged. But Slack’s early WFH boom faded as more organisations opted to use a free rival service provided by Microsoft Teams. By rolling Teams into Office 365 Microsoft has created a giant. Users may not gush about the product but more of them use it.

In October, Microsoft boss Satya Nadella announced Teams had more than 115m daily active users — up from 20m a year ago. Slack has not reported its own daily active user (DAU) count since late last year, when it was 12m. Before Salesforce’s bid interest in Slack was reported last week, Slack’s equity valuation had fallen from more than $20bn at its 2019 debut to under $17bn. 

Zoom also opts not to disclose its DAU count. Investors should take this as a bad sign. The company claimed 300m users in April, but the measure counts one user twice if they participate in two calls per day. The DAU surely must be smaller.

Microsoft uses Teams to lure customers and then cross-sell them other products. It recently dropped its 40-minute time limit on video calls for free users — forcing Zoom to rethink its own cap. The software group can easily afford to undercut rivals. Microsoft had almost $138bn in cash, equivalents and short-term investments at the end of the last quarter. Zoom had $1.9bn.

The end of lockdowns and social distancing will curb demand for video conference services. But a hybrid form of working in which employees split work between home and the office could support future demand. The real threat to Zoom’s $136bn market valuation — 163 times its expected earnings — is Microsoft. Zoom may be synonymous with online calls but it is far from the only provider.

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