AVGO Broadcom Inc

By Aaron Tilley and Asa Fitch 

The spreading coronavirus is shaping up to deliver mixed fortunes for tech companies.

Slack Technologies Inc. said the global fallout from the pandemic is resulting in a surge of interest in its workplace-collaboration software, though the impact isn't reflected in its fiscal 2020 earnings posted Thursday.

Chief Financial Officer Allen Shim told analysts that Slack was seeing a surge in free use of its service. However, he said, a global slowdown in travel over virus concerns could make it harder to close new deals.

Slack's earnings outlook reflected that uncertainty, he said. The company's sales forecast of $185 million to $188 million for the current quarter, and $842 million to $862 million for this fiscal year, both fell slightly short of Wall Street projections, according to FactSet. Shares plunged more than 18% in after-hours trading.

Infrastructure-software and chip-making giant Broadcom Inc. withdrew its annual revenue guidance on Thursday, saying sales were too difficult to predict this year, given the uncertainty around the coronavirus. Instead, the company gave a revenue forecast for its current quarter of between $5.55 billion and $5.85 billion -- lower than the $5.94 billion analysts surveyed by FactSet had forecast.

"Visibility in our global markets is lacking and demand uncertainty is intensifying," chief executive Hock Tan said. The company said the global health crisis didn't have an immediate impact on earnings in the quarter that ended Feb. 2.

The crisis could have a positive impact on some hardware and software providers, Mr. Tan said, as a greater number of people work from home and use internet and cloud-computing services more heavily. Spending on cloud infrastructure probably wouldn't be pulled back because of the crisis and might even improve, he said on a call with analysts Thursday.

Broadcom, long a hardware provider, is increasingly betting also on software to serve enterprises and industry through a spate of acquisitions and asset sales. As part of the shift it also is exploring the sale of its radio-frequency chip business. But Mr. Tan said Thursday that the company had concluded that continuing to invest in and operate the business was in the best interest of shareholders.

Chief Financial Officer Tom Krause signaled Broadcom's acquisition plans were on hold because of coronavirus uncertainty. "We're focused on liquidity; we're focused on capital returns," he said on the call with analysts. "At least for the time being, M&A is off the table, at least until visibility improves."

Publishing software provider Adobe Inc. Thursday said the spread of the novel coronavirus was affecting spending, particularly in areas hit by the pandemic. Because of the health crisis, "we expect some enterprises will delay bookings, postpone services implementation and reduce expenses," Adobe Chief Executive Shantanu Narayen told analysts after the company posted first-quarter results. "The situation is concerning" in the short-term, he said, with "tremendous uncertainty."

The company also said spending on its products from consumers could be dented in markets most affected by the virus as it issued a muted outlook for the current quarter. It forecast sales of $3.18 billion and adjusted earnings per share of $2.35, both trailing Wall Street expectations. The company, among many to encourage employees to work from home during the outbreak, reported $3.09 billion in sales in the most recent quarter with adjusted earnings of $2.27 per share.

Safra Catz, chief executive of database vendor Oracle Corp., Thursday said on an earnings call that "it's not yet clear" what effect the virus will have on "our customers and suppliers," as she gave a wider-than-typical sales outlook for the current quarter.

Oracle also said it was increasing a share repurchase program by $15 billion, helping boost shares in aftermarket trading. Shares rose more than 4% after falling 11% during regular trading before the earnings announcement. Sales could retreat or rise 2%, she told analysts.

Apple Inc. and Microsoft Corp., the world's two largest tech companies, last month already warned their earnings could be affected by the outbreak, then still principally confined to China.

"Across the board, no one is immune, but some are better positioned," said Jefferies analyst Brent Thill. "If you're Zoom, Slack or another collaboration app, you're going to have a stronger tailwind given this environment."

Zoom Video Communications Inc. last week said it had seen a rise in use of its videoconferencing systems, though many of those users were opting for free services. The San Jose, Calif.-based company said it wasn't clear how many of those customers would eventually become paying customers.

Write to Aaron Tilley at aaron.tilley@wsj.com and Asa Fitch at asa.fitch@wsj.com

(END) Dow Jones Newswires

March 12, 2020 19:02 ET (23:02 GMT)

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