Adobe (ADBE 2.13%) and Microsoft (MSFT +0.66%) have teamed up to take on customer relationship management (CRM), which has historically been Salesforce's (CRM 3.10%) domain.
ProShares' Executive Director of Thematic Investing Scott Helfstein shares what investors need to know about how the COVID-19 pandemic has accelerated market trends in the cloud and how their new ETF ProShares MSCI Transformational Changes ETF (ANEW +1.83%) is capitalizing on these transformations.
Corinne Cardina: Awesome. There are also a couple of more traditional tech stocks in the future of work part of the basket. Adobe, I think a lot of people, what comes to mind is Photoshop, Illustrator, InDesign. Microsoft people tend to think about their Office Suite, and Windows. What are some of the ways that these older tech companies are really transforming and how the pandemic has spurred that along?
Scott Helfstein: Microsoft is a juggernaut. It's one that's hard for people to wrap their brain around, because it is so prominent. We work with the Office Suite, and Word, Excel, and our operating system. But they've taken a lot of their revenue into the cloud with subscription service. We see that cloud and productivity tools make up about two-thirds. It's really interesting that you talk about Microsoft and Adobe because they've actually announced a partnership a little while ago to take on customer relationship management. So CRM is a new segment, the two of them working in conjunction. By the way, Microsoft, as I think you were implying, also has a big gaming division with Xbox. As we think about virtualizing work, it's a little crazy to think about this. But what about the virtual reality coffee break? Or the virtual reality water cooler? There are some companies that are uniquely positioned to be able to facilitate a new and different remote working environment. Microsoft I think is one that investors should continue to pay attention to. Really important from a productivity standpoint, and Adobe as well. My 11-year-old wanted a subscription to Illustrator for his birthday this year. They are not just talking about PDFs, but they are important in secure document management. However, we've got Photoshop, we've got Illustrator, they also have an artificial intelligence product called Sensei, which actually helps people to do their graphic and document management. They're on the cutting edge of artificial intelligence and machine learning in the documents space as well.
Cardina: Awesome. We're seeing some of these older companies get involved, maybe disrupting something like Salesforce, maybe disrupting something like DocuSign (DOCU 3.82%). Do you see them going after those markets?
Helfstein: I suspect with time they will. But again, it's such a rapidly growing area. If we think about the revenue growth that Salesforce has experienced, and just the growth of the CRM sector, which quite frankly almost didn't exist in its modern form 10 years ago.
Cardina: Yeah.
Helfstein: Whether we talk about something like CRM or we talk about cloud, these are all new areas. We're just at the beginning of these transformations. I would argue that what makes these companies really interesting is, you need them when times are good, and you still need them when times are bad. That whole notion of, we're going to have a reopening trade, and all the things that didn't do well are going to come back. That doesn't prevent these companies from still doing well. These companies had earnings, well, Microsoft grew their revenues by 18%. It's a multibillion dollar company that still managed to get double-digit growth over the past year. Even if that slows, and even if we do return to the office, we're still going to be using Teams and our collaborative tools. We need customer relationship management services when the economy is bad, because then it's all that more important to deliver what your clients need in a timely and efficient fashion. I think investors are a little bit prone to think about reversion to the mean, and to say that things can't stay this good for some of these companies. I think that that misses the fact that so many of these businesses didn't exist a decade ago.
