Why Slack Stock Dropped Today

What happened

Shares of Slack (NYSE: WORK) have dropped today, down by 9% as of noon EST, after larger rival Microsoft (NASDAQ: MSFT) said its competing Teams app had reached 20 million daily active users (DAUs). Slack reported having 12 million DAUs in September.

So what

Microsoft's announcement represents significant DAU growth compared to the 13 million DAUs it said it had in July. The enterprise software giant also notes that Teams acts as a gateway to other forms of collaboration.

Slack app interface on Mac

Image source: Slack.

"What's more, while these users start with simple text-based chat, they quickly move on to richer forms of communication and collaboration," Microsoft 365 exec Jared Spataro wrote in a blog post. "For instance, last month Teams customers participated in more than 27 million voice or video meetings and performed over 220 million open, edit, or download actions on files stored in Teams."

Now what

Many Slack investors consider Microsoft to be Slack's greatest competitive threat, even as CEO Stewart Butterfield continues to downplay concerns and argues that Microsoft's user metrics are misleading. Microsoft uses various subtle strategies to boost Teams DAUs, such as having the app launch when a computer is turned on. At a tech conference last month, Butterfield said that "there's a very aggressive push to get people in [to Teams]."

Slack has instead tried to emphasize user engagement over sheer DAU figures. Slack users spend an average of nine hours per day connected to the platform, including 90 minutes of active usage per workday. Microsoft has not shared detailed engagement metrics.

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Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Microsoft and Slack Technologies and recommends the following options: long January 2021 $85 calls on Microsoft. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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