Zoom and Salesforce stand to benefit from Microsoft’s unbundling of Teams and Office

Microsoft’s
rivals
won
a
reprieve
on
Monday,
when
the
software
giant
said
it
would

split
up
its
Teams
and
Office
bundles
following
scrutiny
from
European
regulators.

Zoom,
whose
video
chat
app
took
off
during
the
Covid
pandemic,
has
struggled
of
late
to
compete
with
Microsoft’s
suite
of
communications
products.
Slack,
now
owned
by


Salesforce,
has
long
pined
for
this
type
of
split,

submitting
an
antitrust
complaint
to
the
European
Commission
in
2020
over
what
it
viewed
as
illegal
tying
of
Teams
into
Office.

With
Microsoft’s
latest
announcement,
some
customers
will
have
to
pay
more
money
to
get
the
same
features.
For
example,
new
clients
of
Office
365
E3
will
pay
$3
more
per
person
per
month
with
the
split
than
they
would
for
the
combined
offering,
according
to
a

blog
post
and
previous
price
lists.

Analysts
at
Mizuho
Securities
wrote
in
a
note
on
Monday
that “while
customers
believe
Zoom
is
a
superior
platform
vs.
Teams”
and
other
vendors, “the
bundling
of
MS
Teams
to
Office
365
has
always
been
enticing
for
customers
to
consider
Teams.”

Zoom’s
revenue
growth,
which
peaked
at
over
350%
in
2020
and
2021,

slowed
to
2.6%
in
the
latest
quarter
and
has
been
in
single
digits
for
seven
straight
periods.

“In
our
view,
the
unbundling
of
MS
Teams
should
help
alleviate
some
enterprise
churn
headwinds,”
wrote
the
Mizuho
analysts,
who
recommend
buying
Zoom
shares.

Organizations
that
already
pay
for
the
Microsoft
bundle
can
keep
using
Teams
and
Office
as
is
or, “if
they
wish
to
switch
to
the
new
lineup,
they
can
do
so
on
their
contract
anniversary
or
renewal,”
the
blog
post
said.

Last
year,
Microsoft
generated
almost
$53
billion
in
revenue
from
Office,
including
Teams,
up
about
14%
from
2022.
CEO

Satya
Nadella
told
analysts
on
the
company’s
earnings
call
in
October
that
Teams
had
over
320
million
monthly
active
users.

Salesforce,
which
competes
with
Microsoft
in
a
number
of
areas
including
communications
and
collaborations
tools,
acquired
Slack
in
2021
for
$27
billion,
its
most
expensive
purchase
since
the
company’s

founding
25
years
ago.

In
July
2020,
months
before
Salesforce
announced
the
agreement,
Slack
filed
a
complaint
about
Microsoft
in
Europe.

“Microsoft
is
reverting
to
past
behavior,”
David
Schellhase,
Slack’s
general
counsel
at
the
time,
was
quoted
as
saying
in
a
press
release,
referring
to
the “browser
wars”
of
the
1990s. “They
created
a
weak,
copycat
product
and
tied
it
to
their
dominant
Office
product,
force
installing
it
and
blocking
its
removal.”

The
year
prior,
Slack
wasn’t
expressing
much
concerns
about
Teams.
Slack
founder
and
former
CEO
Stewart
Butterfield

said
on
an
earnings
call
in
December
2019
that
while most
of
the
company’s
top
customers
used
parts
of Microsoft’s
Office
365
suite,
they
were
choosing
slack
for
messaging
instead
of
the
Teams
app.

Zoom’s
stock
slipped
about
1%
on
Monday
and
Salesforce
shares
rose
0.4%
A
Zoom
representative
didn’t
respond
to
a
request
for
comment,
while
Salesforce
declined
to
comment.

The

Financial
Times
reported
last
year,
citing
unnamed
individuals,
that
Microsoft
would
eventually
let
companies
choose
to
buy
productivity
software
subscriptions
with
or
without
Teams
to
head
off
a
competition
investigation
from
the
European
Union.
Months
later,
the
European
Commission

disclosed
a
probe
into
Microsoft’s
Teams
and
Office
bundling.

In

response,
Microsoft
started
selling
distinct
subscriptions
for
Teams
and
for
other
productivity
software
in
31
European
countries.

“To
ensure
clarity
for
our
customers,
we
are
extending
the
steps
we
took
last
year
to
unbundle
Teams
from
M365
and
O365
in
the
European
Economic
Area
and
Switzerland
to
customers
globally,”
a
Microsoft
spokesperson
told
CNBC
in
an
email. “Doing
so
also
addresses
feedback
from
the
European
Commission
by
providing
multinational
companies
more
flexibility
when
they
want
to
standardize
their
purchasing
across
geographies.”

WATCH:

How
Microsoft
has
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dodging
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trouble
amid
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tech
headwinds