Atlassian to Slack: If You Can't Beat 'Em, Join 'Em

Shares set a new high thanks to a solid quarter and new partnership.

Motley Fool Staff
Motley Fool Staff
Aug 7, 2018 at 7:32AM
Technology and Telecom

In this segment of the Motley Fool Money podcast, host Chris Hill and Fool senior analysts Matt Argersinger, David Kretzmann, and Aaron Bush weigh the latest double shot of news from enterprise software company Atlassian (NASDAQ:TEAM): strong fiscal Q4 results and a deal with Slack.

The two companies had been competing in some regards. Now, Atlassian will sell some platforms to its former rival and receive a stake in Slack instead. Each is going to focus on what it does best, and the Fools are impressed.

A full transcript follows the video.

This video was recorded on July 27, 2018.

Chris Hill: Shares of Atlassian, the enterprise software company, hitting a new high this week. Atlassian issued strong results in the fourth quarter and announced a new partnership with Slack. You tell me, Aaron, which of these is more significant.

Aaron Bush: The Slack deal is definitely more significant. Over the past several years, Atlassian has competed with Slack through their HipChat and Stride products, but they've never really been that successful in making that as popular as Slack has been able to make their own product successful. What they're doing is, they're essentially selling the IP of those two products over to Slack. Slack is going to pay them a bit for it. Then, Slack is going to shut those two products down and roll those users into Slack.

Through this, Atlassian is actually taking a stake in Slack. This is really the end of competition for these two companies, and the beginning of collaboration. I think that's a big deal. Both of these companies now focus on two different parts of enterprise collaboration software. I do think we'll be able to see more integrations over the next few years, and I think that's going to be a big deal.

Matt Argersinger: It's so rare to see a company that accepts the fact that they have the inferior product in the marketplace.

Hill: To a smaller competitor.

Argersinger: Right! And immediately says, "We're shutting down our own products, or at least, we're going to do a partnership deal, and we're going to adopt their superior product and see if we can work together." It's a fantastic decision by Atlassian.

Bush: I would say, too, that Atlassian also makes tons of money. They've done such a good job of rolling up other competitors. They're in a deal-making kind of zone. This will free up more cash that they can then put to use in areas they can dominate even more.