Slack Technologies Better Watch Out – Here Comes Microsoft!

This is not investment advice. The author has no position in any of the stocks mentioned. WCCF TECH INC has a disclosure and ethics policy.

We've got an interesting competition brewing here between a once plucky start-up and one of the world's most valuable companies. Slack Technologies is the maker of the Slack platform which is a "real-time collaboration and productivity platform".

Microsoft (NASDAQ:MSFT) is well... you know exactly who they are, the maker of Windows OS and many other things and are currently the second most valuable company in the entire world - right behind Apple.

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I've covered Slack twice before. Back in August of 2018 Slack was a privately held company that boasted about 8 million active users of its service. At the time the company was valued at $7 billion and was already operating cash-positive, a rarity in unicorn startups these days.

We then jump April of this year and Slack went with a somewhat uncommon direct listing (direct public offering or DPO). Shares hit a high of $42 per share that first day, giving the young company a total valuation of over $20 billion.

Fast forward to now and some alarm bells are beginning to go off for Slack investors

As I mentioned Slack boasted 8 million daily active users a little over a year ago, and today the most recent data we have comes from last month where Slack announced it had 12 million daily active users using its platform.

Fast forward to today: Microsoft announced just this morning that it now has 20 million users on its competing service, named Microsoft Teams. That's 8 million more than Slack!

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Teams and Slack have much of the same core functionality - which is to allow workgroups to communicate and collaborate using integrated tools to help ease the flow of documents and data.

Despite launching Teams in 2016, a full two years after Slack, Microsoft now boasts 80% more users. The Redmond, WA-based megacorp is finding traction by enticing Office 365 subscribers to simply add-on the Teams module, which makes sense after all as the Office suite of apps - Word, Excel, Powerpoint chief among them - continues to dominate offices around the world.

Shares of Slack plummeted today, the worst of any large-cap tech firm with a drop of more than 10% on the day. The stock market hasn't been kind to the company, as prices have almost continuously dipped since hitting the market. The company is now worth about half of what it was in April.

Microsoft has what amounts to infinite resources and reach as compared to Slack - so things might be stacked in Redmond's favor. However, don't count out the San Francisco-headquartered Slack just yet. In the second quarter, it posted a 58% growth in revenue year on year, and it continues to add large corporate customers such as Cole Haan, Fox, BBC, Lyft, and even IBM.

It's possible there is space for both companies to exist in this space after all.

Slack is expected to release its third-quarter earnings on December 4th and it will reveal just how many users it commands then which will give us better insight into where things are headed.