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DAILY BRIEFING

Cut Salesforce some Slack

Written by Li-Ann Chin, associate
Edited by Kevin Pringle, partner
8 December 2020

Good morning,

In the early 2000s, Marc Benioff, chief executive of Salesforce, staged the first theatrical protest Silicon Valley had ever seen. He hired paid actors to carry “anti-software signs” and march in front of a user conference for Siebel Systems – a former tech Goliath. Later in the year, Beninoff hosted a military-themed party where guests threw “pieces of software” into trash bins.
 
The stunts attracted media coverage, but were simultaneously met with disbelief and ridicule. Indeed, no one predicted at the time that a tiny start-up would pioneer the Software-as-a-Service (SaaS) distribution model, rendering legacy-hosted Customer Relationship Management (CRM) systems practically obsolete. In 2020, the company announced a second-quarter revenue of $5.15bn, a year-on-year increase of 29%. Its latest strategic acquisition of Slack – an intra-office messaging service with a cult-like following – may yet prove to be crucial in elevating Salesforce’s status to one of the tech big leagues.
 
Hailed as “the most strategic combination in the history of software” by Stewart Butterfield, Slack’s co-founder, the £27.7bn merger is reportedly one of the largest in the software industry. The acquisition will see Slack become the new interface for Salesforce Customer 360, a move that could transform how users communicate and collaborate on the platform. Salesforce’s purchase of Slack would also boost its position to directly challenge Microsoft, seeing as the latter has now bundled Teams into its Office 365 offering.
 
And yet, success is anything but clear-cut. Despite the boom that tech companies have enjoyed during the pandemic, Slack has lagged behind those of Zoom and other enablers of remote working. In the first half of 2020, Microsoft Teams’ userbase skyrocketed to a whopping 75 million, from 13 million in July 2019.  Slack, by contrast, failed to enjoy similar heady levels of growth. Operating on a freemium model, the start-up reportedly struggles with converting subscribers to profit. Indeed, some $28bn has been wiped from Salesforce’s value since news of the deal emerged, reflecting Wall Street’s concerns.  
 
Nonetheless, Salesforce’s acquisition of Slack marks a defining moment for the cloud software industry. As the future of work rapidly evolves as a result of digitalisation and Covid-19, the combination of Salesforce and Slack in a single software company is definitely one to keep an eye out for.
 

News

Speaking to Sky News yesterday afternoon, foreign office minister James Cleverly confirmed that the UK government has plans to “absolutely ensure” the continued supply of coronavirus vaccines, even in the event of a no-deal Brexit outcome, citing the use of non-commercial flights and border arrangements. The Road Haulage Association warned a failure to agree to an EU-UK trade deal when the transition period ends could see significant disruption for up to 12 months.
 
First minister Nicola Sturgeon has confirmed that the 11 Scottish council areas in west and central Scotland currently subjected to the highest tier of Covid-19 restrictions will exit level four on Friday. A decision on the levels that each region will be placed in is expected to be taken this morning.
 
US president-elect, Joe Biden, has chosen Xavier Becerra, the California attorney-general, to be the next US health and human services secretary, as he prepared to unveil the team tasked with tackling the pandemic during his administration. Anthony Fauci, infectious disease specialist at the National Institutes of Health, will reportedly be staying on, while Rochelle Walensky, chief of infectious diseases at Massachusetts General Hospital, has been tapped to be the next director of the Centres for Disease Control and Prevention.
 
Abu Dhabi has started a volunteer program for Phase 3 clinical trials of Russia’s Covid-19 vaccine, Sputnik V. Russian president Vladimir Putin announced the registration of Sputnik V in August and a second inoculation was approved in October. Abu Dhabi is reportedly seeking for 500 volunteers, according to the Abu Dhabi Government Media Office. (£)

Business and economy

Uber has abandoned efforts to develop its own self-driving car and will instead swap its operations for a minority stake in Aurora, a driverless vehicle start-up backed by Amazon and Sequoia, at a significantly marked-down valuation. Uber will hold a 26% stake in the start-up and Dara Khosrowshahi, chief executive, will take a board seat at Aurora.
 
Prime minister Boris Johnson is to travel to Brussels for make-or-break talks on a UK-EU trade deal, with negotiations deadlocked and warnings that there was “every chance” they may fail. Timings have not been confirmed, but the meeting between Johnson and Ursula von der Leyen, European Commission president, could take place on Wednesday ahead of Thursday’s European Council meeting in Brussels. (£)
 
According to latest data from Barclaycard, spending in the UK dropped 1.9% last month as restrictions took effect but spending on essential items climbed by 4.9%. Supermarkets enjoyed a 17.9% rise in sales with a staggering 97.4% jump in online shopping ahead of Christmas. This is in part due to steep discounting but also because consumer confidence has been boosted by news of a vaccine rollout. Data reveals that a third of the British population are feeling more upbeat about their job security and finances as a result.

Columns of note

With Warner Bros having announced last week that it would be releasing its 2021 blockbusters — all 17 of them — in cinemas and simultaneously on its streaming platform, it seems inevitable that other big studios will soon follow suit. Will this be the end of cinema-going? And if so, would that really be such a bad thing? Writing in The TimesIndia Knight speaks for all introverts when she confesses to dreading having to renew her social life, post-Covid.

On 1 January 2021, EU nationals who care for older people in residential homes can no longer be recruited to work in the UK, as they earn below a £25,600 threshold for skilled workers. In parts of south-east England, up to a third of care workers come from the EU, feeding a turnover that can be as high as 50% a year. In The GuardianSimon Jenkins argues that England is facing yet another Brexit disaster in care home staff shortages. By far the worst-off victims of the pandemic have been elderly people. Now, it appears that the worst-off victims for Brexit are also going to be the elderly.

Cartoon source: The Telegraph

Markets

What happened yesterday?

Stocks fell as coronavirus infections swept across U.S. states, triggering fears of more restrictions. Led by energy and financial companies, the S&P 500 dropped from an all-time high by 0.3%, as of 2:41pm New York time. In contrast, the Nasdaq 100 rose for a ninth straight day – its longest winning streak in almost a year.
 
Across the Atlantic, the pound dipped as much as 1.6%, as EU-UK talks showed signs of unravelling. The FTSE 100 edged up by 0.08%, ending in the green at 6555.39 as Brexit fears dragged on European stocks.
 
West Texas Intermediate crude fell 0.1% to $46.22 a barrel. Gold strengthened 1.4% to $1,864.98 an ounce.
 
In company news:
 
DIY chain Kingfisher is expected to return £130m of business rates relief in the UK and the Republic of Ireland, citing stronger sales than expected. The company has already paid back its furlough support in full, totalling £23m.
 
Rolls-Royce announced that it would sell its nuclear instrumentation business in the first stage of plans to make £2bn in disposals to fuel its post-coronavirus recovery.
 
Ted Baker’s shares plunged by 16% after posting soaring half-year losses as it revealed it had axed almost 1,000 jobs across its stores and head office.
 
Furniture giant Ikea has announced it will stop printing its traditional catalogue, one of the world’s biggest annual publications, after 70 years.

What’s happening today?

Finals
Numis
Renew Holdings

Interims
Begbies
Gb Group
Sdcl Energy Ef.
Solid State
Uls Tech
Vianet Grp

AGMs
Allergy Thera.
Fidelity Asian Values
Greatland Gold
Haydale
Henderson Int.
Util
Volta Fin
Worsley Inv Ltd

Int. economic announcements
(10:00) ZEW Survey (GER) – Current Situation
(10:00) ZEW Survey (EU) – Economic Sentiment
(10:00) ZEW Survey (GER) – Economic Sentiment
(10:00) Gross Domestic Product (EU)

Source: Financial Times

did you know

’Wifi’ doesn’t stand for anything:  it’s a pun on Hi-Fi, (from ‘High Fidelity’) not short for the meaningless ‘Wireless Fidelity’.

Parliamentary highlights

House of Commons

Oral questions
Justice (including Topical Questions)
 
Ten Minute Rule Motion
BBC (Transparency) – Alun Cairns

House of Lords 

Oral questions
Strategy on heating of housing – Lord Best
Reviewing public health information on the COVID-19 pandemic to ensure that any linguistic, cultural and digital issues with such information are addressed – Baroness Lawrence of Clarendon
Partnership between Netflix and the British Board of Film Classification to establish age ratings for streaming platforms – Lord Clement-Jones
High Speed Rail (West Midlands-Crewe) Bill – third reading – Baroness Vere of Norbiton

Scottish Parliament 

Ministerial Statement
Covid-19
Brexit readiness
 
Finance and Constitution Committee debate: Parliament’s evolving scrutiny function

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