Slack, Broadcom Among Tech Companies Seeing Mixed Coronavirus Impact
March 12 2020 - 7:17PM
Dow Jones News
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)
Copyright (c) 2020 Dow Jones & Company, Inc.
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