Zoom Video Communications

[weijian]

I think it is very refreshing to have the CEO say "I don't know" to his board (well, he's the founder though) and then display the same candor by revealing it to mainstream media.

Zoom became the pandemic’s social network. Its founder is well aware of the pressures that brings

At some point, though, the pandemic will end. Will Zoom go back to being a corporate videoconferencing company? “I have no answer,” Yuan says. His board asked him that very question a few days earlier, and he told them the same thing. Currently, while many new users aren’t paying for the service, some have signed up for Zoom’s paid tiers, and some corporate clients upgraded when they sent their workforces home.

https://www.scmp.com/magazines/post-maga...ts-founder

[BRT]

also refreshing to hear a CEO say the stock price is too high. dont think ive ever heard that before.
"He went on Bloomberg Television complaining that “the price is too high” and implored employees to get back to work"

[cyclone]

Zoom slides 14% as slowing sales-growth forecasts make investors question the stock's 200% post-COVID rally
* Zoom Video sank as much as 14% on Tuesday after the company's quarterly report revealed an expected slowdown in sales growth into 2021.
* The company's third-quarter revenue and earnings beat estimates, and guidance for the current quarter and full fiscal year landed above expectations.
* Yet the high end of Zoom's fourth-quarter sales forecast implies growth of 330% from the same period last year. That's less than the year-over-year growth seen in the second and third quarters.
* Analysts have debated whether Zoom's 200% rally from the market's March lows is sustainable as COVID-19 vaccines near distribution and revenue growth slightly weakens.
* Watch Zoom trade live here.

Ben Winck
Dec. 1, 2020, 05:03 PM

Zoom Video tumbled as much as 14% on Tuesday after its third-quarter report hinted its incredible revenue growth will weaken through the end of the year.

The videoconferencing-software company reported revenue and profits that landed above expectations on Monday afternoon. Guidance for the current quarter topped the average analyst forecast, as did full-year expectations.

Yet Zoom's projections show a slight slowdown in revenue growth into 2021. The company expects revenue to land as high as $811 million in the fourth quarter, easily surpassing the average estimate of $719 million. The high end of Zoom's revenue guidance implies growth of roughly 330% from the year-ago period. While still extraordinary, the rate is slightly slower than that seen over the second and third quarters.

Here are the key numbers:

Revenue: $777.2 million, versus the $693.4 million estimate

Adjusted earnings per share: 99 cents, versus the 75 cents estimate

4Q revenue: $806 million to $811 million, versus the $719 million estimate

2020 revenue: $2.58 billion, versus the $2.40 billion estimate

More details in https://markets.businessinsider.com/news...1029854162

[cyclone]

Zoom's Christmas gift: no cap on call lengths over the holidays

By Reuters Staff
DECEMBER 18, 2020 / 5:00 PM

LONDON (Reuters) - Friends and families kept apart by COVID this Christmas and New Year will not find their virtual gatherings over Zoom cut short by the usual 40-minute limit for free subscribers.

Zoom Video Communications Inc, whose technology has become a feature of household get togethers in 2020’s socially distanced world, said it was removing the time limit for its free accounts on all meetings globally for the holiday season.

This covers the Christian celebrations of Christmas Eve and Christmas Day, the end of Hannukah for Jews and Kwanzaa marked by African-Americans, as well as New Year’s Eve and New Year’s Day. All of them fall in late December or early January.

The coronavirus pandemic has roared to new highs around the world during a second wave, forcing many people to stay home and plan gatherings with friends and family over the Internet instead.

More details in https://www.reuters.com/article/zoom-vid...SKBN28S14Q

[weijian]

I suspect the end game for Zoom will be 1 of the enterprise software giant buying them up. But in the meanwhile, they will continue to ride on the online meeting tail winds.

Zoom shares fall after results as Wall Street turns cautious on growth

Investment bankers and analysts have warned that Zoom faces several hurdles in sustaining growth after its US$14.7 billion bid to buy call centre software firm Five9 fell through.

Still, Zoom reported an adjusted profit of US$1.11 per share, beating Wall Street's estimates US$1.09 per share, according to Refinitiv data.

https://www.businesstimes.com.sg/compani...-on-growth

[Wildreamz]

Hi Weijian,

Do you not think Zoom is a viable business on it's own, and has to be acquired someday? Zoom is both profitable and growing at a healthy clip, I believe it has proven itself. 

I'm just unclear of their competitive advantage long-term.

(not vested)

[weijian]

hi Wildreamz,

On contrary, I think ZOOM has a viable business on its own and is here to stay. But because it is probably going to encounter superbly stiff competition from the giants like Google, Microsoft and Oracle in the enterprise section (and these Giants can bundle, they have money to bleed and they are ready to copy), I am guessing eventual consolidation is highly probable down the road. And because ZOOM has a great product, so it will be a great target.

Using your own inflated stock to acquire and double your size was a great move to grow bigger with low costs. But it seems like ZOOM has missed this opportunity. If the opportunity never presents itself again, it will probably change from predator to prey.

I am no software or tech stock expert. In fact, I am an amateur in all these. My comments above are made just based on the regular practices of mergers & acquisition history that I have come to observe.

[Wildreamz]

Hi Weijian,

No problem, we are all just asking questions because we are trying to learn. 

Let me elaborate on my view and see if you agree; I don't think we disagree much on Zoom.

If Zoom has a truly unique product (as in, 2-10x better or 2-10x cheaper than their closest competition), then it will just keep growing bigger and bigger as it leverages the strength of their main product/platform to expand to adjacent product lines (like what they are trying to do right now with Zoom Phones). Their TAM is essentially unlimited (like for example Microsoft's Windows or Apple's iPhone; they are so much better than their competition, that they can just keep leveraging cash flow from that to build new product lines and revenue streams).

Point is, I'm not sure long-term Zoom is 2x better than Teams or 2x cheaper than Teams. Their product is not differentiated enough.

In tech, slightly better will not cut it, against deep-pocket competitions, you need truly revolutionary product or unmatched value-proposition. For example, Spotify and Apple Music is about the same for users on either platform, but Youtube Premium gives you both Music subscription and Ad-free Youtube videos for the same price. Long-term, people will naturally gravitate towards Youtube Premium.

In short, the execution risk for Zoom is quite high (it relies on continued pace of product innovation faster than their competition). I'd personally avoid Zoom as an investment.

[weijian]

hi wildreamz.

We don't necessarily need to agree with each other views A transaction in the stock market is only possible because there are 2 parties who disagree with each other. Assuming the market is orderly (with no forced selling), the buyer is bullish and the seller is bearish. The key to success is always understanding the other side of the trade.

- I am a user of both products (ZOOM and TEAMS) in a corporate setting. From my own experience, ZOOM has had first mover advantage and it is also generally better than TEAMS. But yes, I can't quantify it as well.

- Moving beyond the corporate setting (eg. using zoom for yoga classes or online consultation etc), I had also used both software as well. Again, ZOOM has first mover advantage over here. Like FB live (and other social software), ZOOM has saved thousands of individual entrepreneurs/business owners affected by the pandemic. So in terms of value proposition, I would say ZOOM has been superior in this aspect.

- And yes, bundling is a very strong weapon. The ball game has changed with "platform economics". Let's compare the cost of subscription for an individual user, the cost of ZOOM is ~11usd/month, while TEAMS is 5usd/month. But wait, TEAMS + Microsoft Office suite is 12.50usd/month. The user doesn't need to quantify the cost/benefit between ZOOM and TEAMS. But by putting the TEAMS individually and then bundle together, Microsoft shifts the comparison to ZOOM vs TEAMS + OFFICE. For 1.50usd more per month, you get a bundle. But of course, it takes time to overcome the incumbent.

ZOOM pricing: https://www.g2.com/products/zoom/pricing
Microsoft TEAMS and 365 buddle: https://www.microsoft.com/en-sg/microsof...ions?rtc=2

- And moving onto enterprise. While I am not privy to how much corporates pay, but it isn't too hard to predict what may happen. Most companies are probably contented with paying for both subscriptions since times are good now. But there will be the time when it is time to cut bloated costs and when that happens, the CTO/CFO has to make the comparison again and it wouldn't be a big surprise that they choose the bundle.

[Wildreamz]

Yes, we don't have to agree, that's what makes a healthy market. 

It just seems like we do in this case. 

And it seems like the market agrees, that Zoom may have a first mover advantage, it does not appear that it has a durable, insurmountable advantage (unlike, say, Tesla in the EV space; or Google in the search space). Hence, the negative rerating.