from Microsoft rivals got a reprieve on Monday, when the software giant announced it would split its Teams and Office offerings 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 Selling powerhas long yearned for this type of split, filing an antitrust complaint with the European Commission in 2020 over what it sees as an illegal linking of Teams to Office.
With Microsoft’s latest announcement, some customers will have to pay more to benefit from the same features. For example, new Office 365 E3 customers will pay $3 more per person per month with the split than with the combined deal, according to a blog post and previous price lists.
Analysts at Mizuho Securities wrote in a note Monday that “although customers believe Zoom is a superior platform to Teams” and other vendors, “bundling MS Teams into Office 365 has always incentivized customers to consider Teams”.
Zoom’s revenue growth, which peaked at more than 350% in 2020 and 2021, slowed to 2.6% last quarter and has remained in the single digits for seven consecutive periods.
“In our view, the unbundling of MS Teams should help alleviate some enterprise churn headwinds,” wrote Mizuho analysts, who recommend buying Zoom shares.
Organizations that already pay for the Microsoft offering can continue to use Teams and Office as is or, “if they wish to upgrade to the new range, they can do so on the anniversary or renewal of their contract,” the blog says .
Last year, Microsoft generated nearly $53 billion in revenue from Office, including Teams, up about 14% from 2022. CEO Satya Nadella told analysts on the company’s conference call the company’s results in October that Teams had more than 320 million monthly active users.
Salesforce, which competes with Microsoft in a number of areas including communications and collaboration tools, acquired Slack in 2021 for $27 billion, its most expensive purchase since the company was founded 25 years ago.
In July 2020, a few months before Salesforce announced the deal, Slack filed a lawsuit against Microsoft in Europe.
“Microsoft is reverting to its 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. and tied it to their dominant Office product, forcing its installation and blocking its removal.”
The year before, Slack didn’t express many concerns about Teams. Slack founder and former CEO Stewart Butterfield said in a December 2019 conference call that while most of the company’s major customers used parts of Microsoft’s Office 365 suite, they chose Slack for the messaging instead of the Teams app.
Shares of Zoom fell about 1% on Monday and shares of Salesforce rose 0.4%. A representative for Zoom did not respond to a request for comment, while Salesforce declined to comment.
The Financial Times reported last year, citing anonymous individuals, that Microsoft would eventually let companies choose whether to buy productivity software subscriptions with or without Teams to avoid a competition investigation by the European Union. A few months later, the European Commission disclosed an investigation into Microsoft’s Teams and Office bundles.
In response, Microsoft began selling separate subscriptions for Teams and other productivity software in 31 European countries.
“To ensure clarity for our customers, we are extending the steps we took last year to separate the M365 and O365 teams in the European Economic Area and Switzerland to customers around the world,” a spokesperson said. Microsoft’s word to CNBC in an email. “It also responds to comments from the European Commission by providing multinational companies more flexibility when they wish to standardize their purchases across multiple geographies.”
WATCH: How Microsoft avoided regulatory concerns in the face of broader technology headwinds
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