Saul, thanks for that. Really impressive sequential growth.
I wrote this at beginning of September but never posted it. I hope it’s provocative to a good discussion.
Time to shake things up a bit here. The high flyer showcase showdown.
Why I would prefer to own Zoom over Crowdstrike.
Growth. Both fantastic. CRWD 94% at $108M and ZM at 96% at $146M. Zoom growing faster at a 35% higher revenue run rate. CRWD fantastic. ZM fantastic-er.
Zoom is profitable and has been for a year or so. And still achieving all that growth. CRWD is on a path to profitability but has a ways to go.
Management. I give plus a million to Zoom. Yuan is the type of humble concerned and capable leader that never misses a thing and will respond much quicker to challenges. The Crowd team acts entitled and bordering on arrogant(though they do have the facts on their side). This type of management team has the tendency to get blindsided by threats.
Disruptiness. Endpoint security has been around for a long time. It has been a necessity, any established company has a solution. Today’s endpoints are secured one way or the other. Crowd’s prospects are to displace legacy solutions or to secure new businesses that start up or new endpoints that are purchased. There is no new market or new place for endpoint for Crowd to win. It’s a known market. Ok maybe IoT has some untapped land?
Zoom I argue is in a very much untapped field. There is legacy solutions. Most were adopted long ago and tucked away and forgotten about. Never fully implemented in most businesses because the systems were not worthy. Many companies may not even have a video communication solution at all. That will not be the case 5 years from now and Zoom will be the change. It is this unknown of an immature market, like with Roku and TTD, where longer term hyper growth can thrive. I mean HSBC putting down 290,000 hosts and 5,500 Zoom conference rooms. That is a shift in enterprise communication strategy, and everybody will be doing it and most have not. Then there is the smaller opportunities that abound with the first truly effective video communication platform. That of healthcare and education and expanding your freaking yoga class in Ohio to someone in New Zealand. YouTube was disruptive in bringing video to mass audience, and Zoom is the next logical step to that which is virtualizing presence in real time. Look at video over the last five years and ask yourself where will it be in 10 years. Much more ubiquitous to personal and business life. Now Endpoint over last five years and Endpoint in 10. More Cloudy?
For Endpoint Security Cloud native may not always be the best solution. There are many cases and many end points where a connection to the host is not possible. The strength of the Crowd platform is the lightweight agent installed on the end point that doesn’t take up much resource and it communicates with the mother ship in the cloud to identify problems. Cloud is not always appropriate and therefore Crowd’s addressable market will never converge to 100% of the market, which it doesn’t have to be an outstanding investment. ZScaler has the same challenge. It’s not always the best solution all the time because it is cloud. But cloud native is typically the beat solution for the broadest number of use cases.
Video communication on the other hand will 100% benefit from cloud native. You will not be able to communicate via video with anybody without connecting to the internet.
Finally, the companion Zoom phone product has potential to be just as big and deployed as a unified solution for next gen communication. It’s an easy add on that basically just falls right to the bottom line.
Recap. Zoom has higher growth, higher revenue, doing so profitably, higher CAP, better leadership, will likely capture more of the market share, and operates in a huge unknown because its never been done before.
And Crowd is an incredibly strong company with an incredibly strong product. They deserve glory as well. And maybe even a place in the portfolio.
In the end I like Zoom just a bit better.
*Back to present. Values for both have come down. CRWD is very compelling at the current valuation, it has suffered more, and I believe it is because of the differences I described. Zoom is also much more compelling. I sold ZM shortly after writing this and am now back in. (I keep doing this, it’s just the valuation seemed so crazy earlier).