BySheridan Hurwit 2019-06-21 726
At first glance, the communications app Slack appears to be the perfect investment case: Since its foundation in 2013, the company has managed to become a symbol of fast and efficient communication in companies and, following the startups, has now also conquered the more technology-oriented departments in large companies around the world.
Out of the CC hell of Reply-All e-mails - keyword "Please take me off the distribution list", but nicely sent to everyone - into the fast and convenient chat communication that employees are not only used to from their private environment today, but also expect.
And the best from an investor's point of view: Because large companies are cumbersome, Slack or a similar tool has by no means arrived in all companies. Companies around the world are still struggling with much less flexible communication tools, and especially outside the USA there is huge growth potential in a still largely untapped market.
Slack wants 26 US dollars per share when it goes public today on the New York Stock Exchange via a direct placement - a valuation of 16 billion dollars. Slack is still making losses - but in view of the company's high growth this is no longer a reason not to go public. Last year, the company made a loss of around 141 million dollars. The number of corporate customers rose by almost 50 percent to 88,000. According to Reuters, large companies pay Slack at least 100,000 dollars for an annual license. In view of these figures, the 16 billion valuation for a Tech share does not seem exaggerated.
It all sounds like the perfect stock market story: B2B software is popular, scalable, growing fast and delivering real value to customers. All Slack has to do now is wait for the software to spread and then switch to profit. While Slack's costs will only grow slightly in the coming years - for example, through more support and sales staff - revenues will increase sharply as the customer base continues to grow.
But on the horizon of this radiant stock market story lurks a small dark cloud - which at least has the potential to become a thunderstorm: Microsoft. The leading provider of business software and currently the most expensive company in the world has long since copied Slack with its own team solution.
That was to be expected in principle, of course. Slack is a software that works well and smoothly across different devices - but certainly not a technical or inimitable miracle. And successful software is simply copied. The problem is different: almost every company in the world has a Microsoft Office license and teams are part of Microsoft's latest version, Office 365.
Since companies already have Office licenses in almost all cases, many IT decision makers will tend to prefer teams. And then the whole thing is integrated into the rest of the Microsoft software environment that already exists in the company. As early as December 2018, teams overtook Slack in terms of market share.
Slack has a strong brand and a good software base. The question is whether this is enough to set Slack apart from other teams. Slack may come up with even more functions so that they benefit from the network effect - the fact that Slack is already being used in many companies.
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