Wall Street thinks Slack’s antitrust complaint against Microsoft is a ‘smart business decision,’ but won’t change anything (WORK, MSFT)

  • Slack has filed an antitrust complaint against Microsoft with the European Commission, accusing the tech giant of anti-competitive behavior with its chat and collaboration app Teams.
  • The complaint wasn’t exactly surprising: Slack CEO Stewart Butterfield has previously called Microsoft “unhealthily preoccupied” with “killing” Slack.
  • Regardless of the outcome of the complaint, Wall Street analysts say it’s a “smart business decision” for Slack because it puts more scrutiny on Microsoft’s dominance in collaborative software and could force the company to slow down. 
  • However, they’re doubtful that it will lead to Slack achieving its ultimate aim of forcing Microsoft to sell Teams as a standalone product. 
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Slack has filed an antitrust complaint against Microsoft with the European Commission, it announced Wednesday, accusing the company of stifling competition through its chat and collaboration app Teams. Slack accuses Microsoft of engaging in illegal, anti-competitive tactics by tying Teams into its productivity suite, force-installing it for customers, blocking its removal, and hiding its “true cost” from its enterprise customers.

The European Commission must now decide whether or not it will do a formal investigation, but several Wall Street analysts said that filing the complaint was a good business decision for Slack regardless of the outcome, because it puts more scrutiny on Microsoft’s dominance and could force the company to slow down. However, they’re also very doubtful that Slack will actually achieve its ultimate aim: Forcing Microsoft to unbundle Teams from the Microsoft 365 Suite and sell it as a standalone product.

How the antitrust complaint could benefit Slack — even if Microsoft wins 

The complaint is not entirely surprising given CEO Stewart Butterfield’s previous comments about Microsoft’s anti-competitive behavior. Butterfield recently said Microsoft was “unhealthily preoccupied” with “killing” Slack because it presents an existential threat to email, which is at the core of the Office 365 suite. He has also called Microsoft an “unsportsmanlike” competitor

Overall, the complaint could bring more attention to Microsoft’s overall dominance in the enterprise software market while making the tech giant more cautious about building features to compete with rivals like Slack and Zoom, said Rishi Jaluria, an analyst at DA Davidson. 

“I think it’s a smart business decision by Slack because there’s upside to it,” Jaluria told Business Insider.” It could kind of force Microsoft to slow down some of the things that they’re doing that Slack and other rivals aren’t happy with. I also think customers are going to look at this and start to think that ‘maybe we are too dependent on Microsoft products.'”

In recent years, Slack has launched integrations with other tools like Dropbox, Zoom, Okta, Atlassian, and others, which can give customers a similar experience to a productivity suite like Microsoft — with more customization and flexibility. The complaint could help Slack’s strategy of trying to convince customers that combining different tools in this way leads to a better user experience than buying into one platform, like Microsoft 365: “Maybe you would have more customers that are going to think more critically about that,” Jaluria said. 

Analysts from William Blair agreed in a note to clients Wednesday: “We see this as an independent action meant to drive a larger conversation on Microsoft’s competitive behaviors.”

Satya Nadella
Microsoft CEO Satya Nadella
REUTERS:Shannon Stapleton

The complaint is a “no harm no foul” move for Slack, Wedbush analyst Dan Ives told Business Insider. Slack is taking this route as it goes after more of Microsoft’s bread-and-butter enterprise customers, he said.

“The biggest threat to Slack is the Microsoft penetration story with Teams,” he said. “So it’s not a surprise that they made this move, especially at this juncture.”

Still, he’s doubtful that the complaint will “broaden into a bigger risk for Microsoft.”

Slack’s VP of communications and policy argued in a press conference Wednesday that Microsoft’s tactics with Teams mirror the pattern of behavior with its Internet Explorer Browser that got it into antitrust trouble in the 1990s, when its dominance in the PC market was deemed a monopoly.

However, both Jaluria and Ives agreed that the Teams situation is not as glaring an offense as that past example, in part because Teams does integrate with competitors like Zoom, Dropbox, and Okta. They think that the idea of Microsoft actually being forced to separate Teams is far-fetched. 

“I don’t think that that’s a likely scenario,” Ives said, while Jaluria was even more blunt: “That’s not going to happen.”

Slack had good reason to file its complaint with the EC now

Slack’s complaint comes as both companies have seen growth during the pandemic — with Teams boasting 75 million daily active users as of April and Slack saying in late March that it added 12,000 new paid customers in its first quarter, more than double it added in the previous quarter. Slack hasn’t given an updated daily active user number since October 2019 when it had 12 million. 

Part of Slack’s motivation in filing this complaint is that Teams’ rapid growth over the last few months has “stunted” Slack’s growth, Futurum Research analyst Dan Newman said. He points out that of all the productivity tools, Slack grew the slowest during the first few months of the pandemic: Its revenue only grew 50% last quarter, the same as it had the quarter before.

 The fact that Slack decided to file its complaint in Europe is also significant, Newman said, because the EU tends to be stricter about anti-competitive behavior. For example, between 2017 and 2019, the European Commission ruled against Google in three different cases, fining it over $9 billion.

Overall, analysts agree it adds to the momentum around scrutinizing big tech players for potential anti-competitive behavior. Microsoft has largely avoided antitrust scrutiny since its historic antitrust battle in the late 1990s. Meanwhile, other large American tech companies like Apple, Amazon, Google, and Facebook have faced antitrust probes both in the US and abroad in recent years and their CEOs are set to testify before Congress next Monday.

“It adds to a theme that we’re seeing, there’s momentum against big tech players,” Ives said. “So if Slack was going to make this move, make it now rather than six months now.”

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