Slack doubles down on competition with Microsoft, touting enterprise customer growth among Office 365 users – 10minmail

Slack went public in June. (New York Stock Exchange Photo)

Slack used its first-ever earnings report to highlight growth among customers that are deep in the Microsoft ecosystem, another sign of the fierce competition between the two companies.

CEO Stewart Butterfield ran through several examples of growing use of Slack’s Enterprise Grid offering, without naming names, in a call with investors Wednesday. Butterfield noted that some of these enterprise customers — some were new, others expanded their use of Slack — were also Office 365 users. Butterfield implied that these companies chose to pay for Slack, even though Teams is included in Office 365.

“Of course, like most of our large enterprise customers, they run on Office 365,” Butterfield said of an un-named Fortune 100 financial services firm that added thousands of employees on Slack. “They still chose Slack because only Slack was capable of meeting their needs. Increasingly, in regulated industries, we are seeing significant traction because Slack delivers security and compliance with scalability, an open platform and a great user experience.”

Slack finished the quarter with more than 100,000 paid users, up 37 percent over the prior year. Butterfield noted that these enterprise customers include tens of thousands of users all the way up to more than 100,000 people.

Teams is Slack’s primary competitor, and Microsoft has been investing heavily in the service to make it useful across industries. Microsoft said in July it had 13 million daily active users, ahead of Slack’s most recent disclosure of 10 million users, though that came back in January. Teams figures to get a huge bump in a couple years as Microsoft prepares to make it the default meeting tool for Office 365 when it retires Skype for Business in 2021.

Slack is not only competing with Teams, it also has to deal with Google, Facebook and other chat-based productivity providers. Butterfield acknowledged the challenge on the call with investors, noting that it can’t rely on name value or a big suite of other products to bundle together to entice customers.

“We only win if people choose Slack, and they only choose Slack if it provides real value to them,” Butterfield said. “There is no other path. We can’t rely on bundling or superior distribution or sunk cost of entrenched products.”

Slack cruised past analyst expectations in the quarter, posting losses of $0.14 per share on $145 million in revenue, a 58 percent increase over the prior year. However, Slack stock was down as much as 12 percent in pre-market trading Thursday morning following projections of slowing revenue growth in the third quarter.

Slack went public through a direct listing on the New York Stock Exchange in June. Immediately out of the gate, its stock shot up roughly 50 percent to $38.50 per share. Since then, shares in the company have steadily declined, and the stock is close to falling below its initial price of $26.

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