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Friday June 25, 2021



Salesforce Announces Acquisition

Salesforce.com, Inc. (CRM) posted its quarterly earnings report for the third quarter on Tuesday, December 1. The customer relationship management software company's revenue and profits beat analysts' expectations.

The company reported revenue of $5.42 billion, up from $4.51 billion in revenue at this time last year. This beat analysts' expected revenue of $5.25 billion for the quarter.

"We're rapidly moving to an all-digital world, where work happens wherever people are," said Marc Benioff, Salesforce's CEO. "Our results are being driven by the success of our customers and the relevance of our Customer 360 Platform in this new normal."

Salesforce posted net income of $1.08 billion. This was up from a net loss of $109 million during the same quarter last year.

The company is continuing its trend of mergers and acquisitions. Salesforce recently announced it will acquire Slack for $27.7 billion. Salesforce projects full-year revenue between $21.10 billion and $21.11 billion for fiscal year 2021. For fiscal year 2022, Salesforce expects revenue between $25.45 billion and $25.55 billion.

Salesforce.com, Inc. (CRM) shares ended the week at $225.86, down 8% for the week.

Slack Reports Losses

Slack Technologies, Inc. (WORK) reported earnings for the third quarter on Tuesday, December 1. The messaging platform company exceeded analysts' revenue and earnings expectations for the quarter.

Slack reported revenue of $234.5 million for the quarter. This was up 39% from $168.7 million at the same time last year and above the $225 million that analysts had predicted.

"We had a phenomenal quarter, headlined by continued acceleration in new paid customer growth, with 12,000 net paid customer additions, up 140% from the same quarter last year," said Stewart Butterfield, Slack's CEO and Co-Founder. "The accelerating growth is partly driven by increased awareness and demand due to the work from home environment, but we believe the larger portion comes from continued product momentum which shows up in the new user experience and, especially, from Slack Connect driving viral growth."

Slack posted a net loss of $64.8 million for the quarter. This is an improvement from a net loss of $87.9 million during the same quarter last year.

Slack is an enterprise communications platform, offering messaging solutions for businesses. The company has seen strong growth in the quarter with many businesses throughout the nation pivoting to remote office during the COVID-19 pandemic. Slack's paid customers in the quarter rose 35% to over 142,000. The company will be acquired by Salesforce. The deal is expected to close in mid-2021.

Slack Technologies Inc (WORK) shares ended the week at $42.80, down 2% for the week.

Hewlett Packard Enterprise Reports Earnings

Hewlett Packard Enterprise Co. (HPE) released its quarterly earnings report on Tuesday, December 1. The information technology products and services provider exceeded revenue and earnings expectations for the quarter.

Hewlett Packard Enterprise reported quarterly revenue of $7.21 billion. This is down from last year's fourth quarter revenue of $7.22 billion, but above the $6.88 billion that Wall Street predicted.

"The global pandemic has forced businesses to rethink everything from remote work and collaboration to business continuity and data insight," said Hewlett Packard Enterprise President and CEO Antonio Neri. "Over the last several months, customers have increasingly turned to HPE for our unique capabilities from edge to cloud that help them empower their workforces, deploy resilient new IT solutions and extract insights from critical data, while consuming these solutions more flexibly as a service."

The company announced net earnings of $157 million for the quarter, which was down from net income of $480 million one year ago. On an adjusted earnings per share basis, the company reported adjusted earnings of $0.37 per share, which was more than the $0.34 per share that analysts predicted.

As part of its earnings report, Hewlett Packard Enterprise announced its decision to move from its current headquarters in San Jose, California to Houston, Texas. The company plans to maintain its Silicon Valley location and stated no layoffs would stem from the relocation. Following the announcement, shares held steady in a muted reaction to the news.

Hewlett Packard Enterprise Co. (HPE) shares closed at $12.34, up 9% for the week.

The Dow started the week at 29,855 and closed at 30,218 on 12/4. The S&P 500 started the week at 3,634 and closed at 3,699. The NASDAQ started the week at 12,224 and closed at 12,464.

Treasury Yields Rise on Job Report

U.S. Treasury yields rose on hopes of a forthcoming stimulus package. Yields hit a three-week high at the end of the week.

On Friday, the U.S. Department of Labor released its data for November. The economy added 245,000 jobs in November, missing economists' forecast of 440,000. The unemployment rate was 6.7%, down from 6.9%.

"The employment report was weaker than expected, BUT the yield has actually moved up this morning," said Matt Maley, Chief Market Strategist at Miller Tabak. "We're guessing that the market believes that this number will get Congress to move more quickly on the COVID relief package."

On Tuesday, a bipartisan stimulus package was revealed. The package would include approximately $908 billion in aid. Notably, a direct aid stimulus check was absent from the proposed legislation. News of a separate targeted relief package is also in the works from lawmakers.

"Based on recent economic data, I continue to believe that a targeted fiscal package is the most appropriate federal response," said Treasury Secretary Steven Mnuchin. "I strongly encourage Congress to use the $455 billion in unused funds from the CARES Act to pass an additional bill with bipartisan support."

The 10-year Treasury note yield closed at 0.97% on 12/4, while the 30-year Treasury bond yield was 1.73%.

Mortgage Rates Move Lower

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, December 3. Rates reached yet another record low this week.

This week the 30-year fixed rate mortgage reached 2.71%, down from last week's average of 2.72%. Last year at this time, the 30-year fixed rate mortgage averaged 3.68%.

The 15-year fixed rate mortgage averaged 2.26% this week. This was down from 2.28% last week. At this time last year, the 15-year fixed rate mortgage averaged 3.14%.

"Despite persistently low mortgage rates, home sales have hit a wall," said Sam Khater, Freddie Mac's Chief Economist. "While homebuyer appetite remains robust, the scarce inventory has effectively put a limit on how much higher sales can increase. Unfortunately, the record low supply combined with strong demand means home prices are rapidly escalating and eroding the benefits of the low mortgage rate environment."

Based on published national averages for the week of 11/30, the national savings rate was 0.05%. The one-year CD averaged 0.17%.

Published December 4, 2020
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