Slack Sales Growth Holds Up Against Growing Microsoft Rivalry
The icon for the chat service app Slack, by Slack Technologies Inc., sits on the screen of an Apple Inc. iPhone 6 smartphone in this arranged photograph in London, U.K.  (Photographer: Chris Ratcliffe/Bloomberg)

Slack Sales Growth Holds Up Against Growing Microsoft Rivalry


(Bloomberg) -- Slack Technologies Inc. gave an upbeat quarterly forecast, demonstrating the software maker’s resilient growth despite intensifying competition from Microsoft Corp.

Revenue will be $172 million to $174 million in the period ending in January, which would be 42% year-over-year at the midpoint, the San Francisco-based company said Wednesday in a statement. Analysts, on average, estimated $173.2 million, according to data compiled by Bloomberg.

Chief Executive Officer Stewart Butterfield has sought to boost the number of paying customers for his company’s workplace messaging and workflow software, versions of which can be used for free. Slack, which had a direct listing on the New York Stock Exchange in June, is being challenged by Microsoft, the world’s largest software maker, which has a rival product called Teams that it sometimes gives to clients at no cost. Slack said it reached more than 105,000 paid customers in its second earnings report as a public company, fewer than the 106,700 analysts expected.

“It was a great quarter for revenue growth,” Butterfield said in an interview. “We call out the enterprise growth specifically.”

Competition with Microsoft has had a smaller effect on the business than some expected, he said. “There’s still a lot of market confusion and we’re going to have to work harder to dispel that. If you think about those concentric circles, there’s a lot where we don’t compete at all.”

In the period ended Oct. 31, sales jumped 60% to $168.7 million. Analysts projected $156.2 million. Slack reported an adjusted loss of 2 cents a share for the quarter, compared with analysts’ estimates of 8 cents.

The number of large customers grew 67% to 821 compared with a year earlier, slower than the pace in the fiscal second quarter, when the metric was 75%. For the first time, Slack disclosed that more than 50 customers are spending more than $1 million in annual recurring revenue on the company’s software.

Shares gained about 2% in extended trading after closing at $21.66 in New York. The stock has dropped 17% since its initial public listing.

Still, investors are wary about the competition from Microsoft. Slack said billings will be $745 million to $760 million in the fiscal year, the midpoint falling short of analysts’ average estimate of $754.3 million.

Slack also announced that Chamath Palihapitiya, a venture capitalist and early investor in Slack, is stepping down from the board. Palihapitiya, who served as a director since 2017, will be replaced by Mike McNamara, former chief executive officer of Flex Ltd.

Bloomberg Beta, the venture capital arm of Bloomberg LP, is an investor in Slack.

©2019 Bloomberg L.P.

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