Years from now, when historians write about the COVID-19 pandemic, there will be hundreds of angles to cover. The uncertainty, the fear, the political discord, the management of “news,” ubiquitous misinformation, the unwillingness to acknowledge where the disease came from, the Tiger King… the list goes on. Quite frankly, the list spans the very serious and the utterly ridiculous, but one of the single most important things that happened is that the world was forced into testing videoconferencing. Large tech and telecom players told us for years that we would ultimately make this shift, but the tech was always wonky and not necessarily stable… until it was. We left names like Skype and Citrix largely in the past and moved on to Teams and Zoom. Frankly, the most user-friendly at the beginning of the pandemic was from Zoom Communications, and almost overnight, Zoom became a verb.
What came with this technological shift was a total transformation in the way business and meetings could take place. Sure, at the beginning, it was necessary. We didn’t know what to expect when we left the office in March of 2020, and very few would have imagined that we’d still not be back in the office 3 and a half years later. And who was most responsible for that change? Zoom Communications. Frankly, the world owes Zoom a debt of gratitude, but unfortunately for Zoom, as the pandemic has become endemic, most people no longer fear COVID, and there’s nothing forcing them to stay remote. Furthermore, the integration of Teams into the rest of the Microsoft architecture means that the market for video calls will likely bifurcate between business (Microsoft) and pleasure (FaceTime). Even if the user interface is materially better at Zoom, their niche may continue to narrow as the big players employ large platforms as a competitive weapon.
When 2020 began, ZM had a stock price of $68.04; later that year, the stock peaked close to $560 per share. As of last week, the stock fully round-tripped to $68 and management demanded that workers return to the office at least 2 days a week. Since last year, the company’s revenue growth has slowed to single digits, operating profit has fallen off a cliff, and analyst normalized earnings per share have started to fall despite enormous “below the line” adjustments to make it look better than it is.
While continued revenue growth is generally encouraging, the bottom-line numbers suggest they’re buying growth and that is likely unsustainable. Any number of business combinations could give Zoom the prospect of holding on to market share, but the FTC and Five 9 Shareholders already blocked their first attempt in 2021. Is this the beginning of the end for Zoom? Probably not, or at least not for a while. But watching Zoom send employees back to the office may signal that even the most devout users of video conferencing realize the importance of in-person business communication. Maybe it is the beginning of the end of fully remote work. We love irony.