October 16, 2019 Finance and Tech Publication

Slack touts users growth as it faces growing competition from Microsoft

Anjali Sundaram | CNBC

Slack, under pressure to show growth as its stock price slides, said on Thursday that its number of daily active users jumped 37% from a year earlier.

The maker of the popular workplace chat app said that over 12 million people used the product daily in September, up from more than 10 million as of the quarter ended Jan. 31, the most recent number the company disclosed. Slack stock rose as much as 2% in extended trading following the announcement.

Slack held its public market debut in June, choosing the unconventional route of a direct listing instead of an IPO. After falling 3% on Thursday to $23.82, the stock is down about 8% from its initial reference price and 38% from the opening day closing price.

In September, Slack reported weaker-than-expected revenue growth of 58% in its first quarterly earnings report since going public.

A rising user count could help counter the perception that Slack’s expansion is being restricted by competition from Microsoft, the world’s most valuable public company. Microsoft said in July that its Teams communication app had more than 13 million daily active users.

“We view MSFT’s unusually nimble and effective response to the threat of Slack as a real thorn in the side of WORK’s business model,” Mizuho analysts led by Gregg Moskowitz wrote in a September note, initiating coverage with a neutral rating.

Slack CEO Stewart Butterfield has been skeptical of how Microsoft determines the number of people using Teams.

“They’re not comparing the same thing when they say daily active user,” Butterfield told CNBC in an interview last week. He said that people who once used Skype for Business to make voice and video calls have been moved over to Teams.

Butterfield is not alone.

In a note to clients last week, DA Davidson analysts Rishi Jaluria and Hannah Rudoff cited increased “competitive intensity” from Microsoft, but said they suspect that the daily user tally for Teams includes instances in which the Teams app loads when a PC starts up. The analysts have a neutral rating on Slack.

A Microsoft spokesperson clarified how it calculates the figure.

“To be counted as active usage, the user must take action in the app,” the spokesperson told CNBC in an email.

Slack reports 6 million paid seats. Paying users are actively on the app for about 90 minutes per day and are connected to it for over nine hours a day. The company said users are taking 5 billion actions, like sending a message or uploading a file, every week.

WATCH: Slack CEO Stewart Butterfield: Growth is the priority

in News
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