Slack Drops on Forecast Miss, But CEO Sees Coronavirus Boost
Stewart Butterfield, co-founder and chief executive officer of Slack Technologies Inc., walks off the stage at the conclusion of an event in San Francisco, California, U.S. (Photographer: David Paul Morris/Bloomberg)

Slack Drops on Forecast Miss, But CEO Sees Coronavirus Boost

(Bloomberg) -- Slack Technologies Inc.’s shares plunged after the company forecast disappointing quarterly sales, signaling that stronger competition from Microsoft Corp.’s rival workplace-communications tool has taken a toll on the software maker.

Still, Chief Executive Officer Stewart Butterfield said the migration of corporate employees forced to work from home because of the coronavirus is generating a “surge” of interest in the platform.

“We’ve had a massive outpouring of questions from new users and existing users,” Butterfield said Thursday in an interview. Even after the illness known as Covid-19 is contained, the experience of millions of people working remotely for weeks could lead to a general shift in how companies use software like Slack’s to communicate, he said.

For now, Slack is subject to the forces wreaking havoc across the economy. Chief Financial Officer Allen Shim said the lower-than-expected revenue guidance for the period ending in April was “prudent,” given how volatile and uncertain the market is right now. The stock tumbled 20% in extended trading.

Revenue will be $185 million to $188 million in the current quarter, the San Francisco-based company said Thursday in a statement. Analysts projected $188.4 million, according to data compiled by Bloomberg. Excluding some items, the loss will be 6 cents to 7 cents a share. Analysts, on average, estimated 8 cents, according to data compiled by Bloomberg.

Butterfield has sought to outmaneuver the world’s largest software maker, Microsoft, whose rival Teams product has posted a meteoric rise in number of users. Microsoft has been competing with Slack for several years, and clients that had put a pause on their use of Slack to try Microsoft are coming back to Slack, Butterfield said.

Slack has invested in unique features to try to keep people from switching, including shared channels that allow different companies to communicate with each other through its application.

More than 32,000 customers are using shared channels, including 90% of Slack’s largest clients, Butterfield said. “I just don’t think they’re going to be able to catch us there.”

Investors have been concerned about the software maker’s slowing sales growth. The stock has dropped steadily since its June 2019 direct listing. Shares closed at $21.35 in regular New York trading on Thursday.

Other financial metrics were more positive. Sales rose 49% to $181.9 million in the fiscal fourth quarter, which ended Jan. 31. Analysts, on average, projected $173.5 million. Slack reported an adjusted loss of 4 cents a share, compared with analysts’ estimates for a loss of 6 cents.

©2020 Bloomberg L.P.

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