There’s a new post on Seeking Alpha about Zoom’s new hardware and how software companies who get into hardware often get clobbered.
These are the headline points:
"-Zoom introduced a new $599 videoconferencing device intended to remove the distractions of taking video calls from other connected devices.
-Historically, software/internet companies that have ventured into consumer hardware have weathered steep losses.
-Snap reportedly lost $40 million on its Spectacles project in 2017, but the negative press and management distraction were likely far more costly.
-Trading at ~31x FY22 revenues, Zoom is a bubble poised to burst."
My personal take is that ZM isn’t going all in on hardware. They are likely making a relatively small investment with hardware to test the market.
In fact, the hardware is being sold by another company DTEN - which has an established base of corporate clients. This could mean the hardware gets Zoom into more organizations!
The author of that article is very much in the camp of “ZM is overvalued”.
The fact that they mentioned SNAP Glasses in the article means it’s an absolutely pointless read… other than to say that it’s great people are drastically underestimating Zoom.
The author, Gary Alexander, has the reputation on this board at least, as a contrary indicator. He thought our stocks were “overvalued” 200% ago. I wouldn’t worry about this article. This hardware is a tiny add-on to Zoom’s primary business, meant to lock customers in more stickily.
At least the article is relatively accurate on the data sources. But his investigation is cursory at best. My 2 cent comments:
- Trading at ~31x FY22 revenues, Zoom is a bubble poised to burst (and consensus is calling for revenue growth to fall to 26% y/y by FY22 per Yahoo Finance, suggesting that this growth rate may not be sustained).
Comment: Well I guess we fools all wait daily with baited breath and trust for the latest Yahoo Finance consensus, right?
-Who will buy this product? Serious, focused Zoom calls that require this kind of specialized hardware are meant for office calls, not casual Zoom calls to friends or faintly. But what kind of employee would shell out $599 to buy their own office equipment? And what office would authorize a reimbursal for a $599 piece of hardware that can only serve one function that employees’ existing computers are already capable of doing?
Comment: This guy obviously has never worked in an office. Every office needs a video conferencing device in every meeting room. The cost of $599 for an enterprise is nothing compared to the benefits to productivity. Companies spend thousands of dollars on good video conferencing equipment. How many times have you seen a dozen people sit by idly while the meeting organizer spends 10 minutes just getting the webex meeting started. What a waste of time. If this can be done automagically by Zoom, this is a game changer. (once we get back to the office post COVID)
-Competition. The product isn’t at all dissimilar from Facebook’s (FB) own video chat offering, where an 8" Mini version of the Facebook Portal starts at just $129 (a quarter of the price). A regular-sized 10" Portal, meanwhile, runs at just $179 while a 15.6" Portal+ is $279. And moving further downmarket, Amazon’s (AMZN) Echo Show devices sell for even less than the Facebook Portal Mini.
Comment: I have never seen or heard of any enterprise using FB or Echo to hold a video conference.