Zoom’s reality check

Zoom is now targeting business customers, who are often reluctant to change their technology

  
A 3D printed Zoom logo is placed on the keyboard in this illustration taken April 12, 2020.

A 3D printed Zoom logo is placed on the keyboard in this illustration taken April 12, 2020.

REUTERS/Dado Ruvic

(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

NEW YORK - Normal is a scary word for a company that thrived in abnormal times. Zoom Video Communications’ revenue hit $1 billion for the quarter ended July 31, a 54% rise. Yet its shares fell more than 15% on Tuesday, partly because some of the video-conferencing service’s metrics, according to Chief Financial Officer Kelly Steckelberg, “have begun to normalize.”

Even after Zoom lost $16 billion of market value in a morning, its valuation is hardly mundane. Its $82 billion enterprise value is 21 times what it expects to make in sales this year, about double the multiple of Skype owner Microsoft and Slack parent Salesforce.com. When Zoom listed in April 2019, its debut market capitalization was almost $17 billion.

The problem with normality is that it’s expensive. Zoom is now targeting business customers, who are often reluctant to change their technology. Rivals in the corporate software space are big and numerous. Marketing expenses grew 70% in the latest quarter, slower than in previous second quarters, but faster than revenue did. Investors seeking a zoom now face a march. (By Amanda Gomez)

(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

(Editing by John Foley and Marjorie Backman) ((SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS: http://bit.ly/BVsubscribe))


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