Zoom started with a clear lead over Teams, but Microsoft's solution has caught up and has long since outperformed it. Its strength is of course to be embedded in Office and the Windows platform, installed by default on 90% of corporate computers.
It is difficult for Zoom to compete with such an overwhelming advantage. The "work from home" approach is here to stay, but the San Jose-based company must diversify if it hopes to return to growth. The few avenues that have been explored have so far come to nothing.
It will also be important not to do anything. The shareholders have, in a very salutary way, blocked the attempts to buy the software publisher Five 9, which Zoom intended to acquire at x25 the revenues, while the former had never made a cent of profit. Such aggressiveness was not reassuring.
Another disturbing element: the dubious visibility on the number of users, which we never really understood how Zoom's management counted them. On this subject, it should be noted that there was a 3% attrition in the first quarter of the current fiscal year, while Teams is gaining users.
Zoom never deserved its $160 billion valuation reached at the peak of the pandemic. It's not even sure it deserves its current enterprise value - market cap minus the $5.5 billion in excess cash - of $14 billion.
Management anticipates that growth will come to a halt this year. As usual, be careful with "adjusted" and "non-GAAP" pseudo profitability. Of course, excluding stock option expenses, Zoom has an operating margin of 38%... Everything would be so much easier if these massive expenses were erased with a stroke of the pen.
Add in the very real cost of personnel and the operating margin drops to 0.9%. Stock option expenses have increased dramatically. In the last fiscal year, they reached $1.3 billion for a turnover of $4.4 billion.
And there is a strange inequity: the exercise price of staff options is more or less the same as the share price at the moment, while those of the Chinese-American founder Eric Yuan can be exercised at around $5. The latter's fortune is therefore comfortably assured.
Rather than looking at the glass as half empty, we can also choose to look at the glass as half full by underlining, for example, that Zoom now achieves in one quarter double the annual turnover it achieved before the pandemic. The bride will be more beautiful seen from this angle.
In the absence of a successful reinvention effort, the best thing that could happen to Zoom would probably be to be bought out. More than one shareholder must be hoping and crossing their fingers!