Communication has been vital during this global stay-at-home initiative. Humans are interactive beings, and digital communication software has allowed us to stay connected. Whether you are conducting a business meeting or having a virtual happy hour with friends, video calls have kept society sane during this health crisis.
We saw Zoom ZM shares surge over 140% this year, as its user base went from 10 million in December to over 300 million daily participants by the end of April (3,000% user increase in just 4 months). Zoom is not the only horse in the video communication race. It is competing with tech giants Microsoft MSFT, Google GOOGL, and Cisco CSCO, who have all been benefiting from this pandemic tailwind.
Microsoft is hedging its bets with two highly functional video services: Skype & Microsoft Teams. Skype for business had been a corporate staple for years, but it has recently lost some of its steam. Still, Microsoft announced that Skype saw a 70% month-over-month increase in daily active users in March, totaling 40 million, which is only a fraction of Zoom's engagement.
Microsoft Teams is where the company is putting its long-term bets. Microsoft is advertising the switch from Skype to Teams as an upgrade. Teams has much more collaborative functionality than Skype, with built-in Office apps and the ability to add 3rd party services. Microsoft's CEO, Satya Nadella, disclosed that Teams had 75 million daily active users at the end of April, illustrating a 32 million user gain from March. This makes a grand total of 105 million daily users over both of its video communication platforms.
Teams advanced collaborative capabilities propels its competitive landscape beyond just the scope of video conferencing services. Slack WORK, the collaboration-driven enterprise that is looking to make email obsolete, is now a direct competitor of Microsoft Teams.
Microsoft's portfolio breadth of essential business applications adds to Teams' allure and long-term potential. Teams is preparing to release a version for friends and family that will further expand its user base.
Zoom has been facing security issues that have pushed businesses away from the 'fad' video service and towards the highly secure Microsoft Teams. I see Teams as the long-term video communication winner.
Alphabet's Google Meet Teleconferencing play has accumulated over 100 million daily active users, adding 3 million daily, says CEO Sundar Pichai in its earnings call late April. Meet, previously named Google Hangouts Meet, is the company's premium video conferencing. Meet allows users to annotate live documents within its cloud-based G Suite, similar to how Teams utilizes Microsoft Office.
The surge in Google Meet's usage can be attributed to its "free for everyone" promotion, allowing users to try out the G Suite Essentials platform for no charge through September. This a smart strategic decision on Google's part. Businesses will get used to G Suites functionality and get them hooked, which Alphabet hopes will turn them into monthly paying subscribers.
In the long-run, I don't think that G Suites can compete with the enterprise essential, Microsoft Office, or its collaboration platform Teams.
Webex is Cisco's video conferencing application, and like its cohorts has been provided with a pandemic related tailwind.
Sri Srinivasan, senior VP & GM of Cisco Collaboration, said, "Webex grew 2.5 times in Americas, four times in Europe and 3.5 times in Asia Pacific. Our growth is sourced from enterprise expansion, education and telehealth." He also announced that Webex was hosting more than 22 million videos per week (in the first two weeks of April).
Cisco just released its earnings Wednesday, May 13th, and beat on both top and bottom-line metrics, sending the shares up roughly 5%. This quarter was highlighted by its security products, which is seeing an uptick as security threats surge in this work-from-home environment. Webex was the other bright spot in Cisco's quarterly results with activity tripling from February to April.
Webex stands out from the cloud for enterprise use because of its use of AI, which includes Cognitive Collaboration Solutions that helps make meetings more productive, and Webex Assistant. Webex Assistant can take notes for you, create action items, and even set-up future meetings only using your voice.
Webex is a natural choice for businesses that are already utilizing other Cisco technologies. This platform is more expensive than many of its competitors, but the offering may outweigh the price point.
I see Zoom (ZM) as enormously overvalued, considering the security concerns and lack of enterprise collaboration technology. I think that Microsoft, Google, and Cisco all offer a robust video conferencing service that will continue to drive growth in the post-pandemic world. I see Microsoft Teams as a winner in this environment because of its reasonable starting price ($5 per user/month) and its widely used essential enterprise Office and cloud functionality.
Keep in mind that these video services still make a relatively small portion of these three businesses top line. Still, video conferencing is starting to grow into something material, with COVID being the catalyst.
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