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The “CFO put”, WFH – and why the tech boom will continue

The surge in Zoom calls during the early months of the pandemic was only the start, according to Microsoft, which says online meetings are continuing to break records. 

Its research, based on an analysis of keyboard use, called The Rise of the Triple Peak Day, shows how working hours are morphing into family life, without people noticing. 

Twitter has evolved into a rolling news service for its 330 million users. Conspiracy theories surround Elon Musk’s decision to buy a 9% stake. But perhaps he just thinks the shares are cheap. 

As they work longer, and harder, facilitated by 24/7 access to online meetings, email and texts –  employers are benefiting. Disruption is penetrating ever more deeply into companies, homes, the public sector and emerging markets. And tech cash flow is benefiting accordingly. 

This year’s sellers of exuberant tech stocks have cut the Fang+ index by 17.6%. But they are overlooking the sector’s defensive characteristics, notably the way they can prosper, as interest rates rise, by using use their revenues to nurture their clients and develop new products.

They also use cash flow for share buyback programmes, like those which pushed Apple and Microsoft back into contention following a period in the doldrums. Some call buybacks a “CFO put”, where finance directors use corporate cash to protect shareholders against loss when prices fall too far. It’s a neat way to improve your share rating. 

The Microsoft survey goes to some lengths to show how work practices are changing. It says around 30% of workers, who used to knock off at 5 pm, now access their computers for work purposes, including e-mail, late in the evening. Productivity peaks traditionally seen before and after lunch, are now accompanied by a third burst of activity in the evening. Microsoft calls the phenomenon a “triple peak day.”

Some of this relates to work spreading across the day when people work at home. But the boundaries between work and play are becoming blurred, with people continually switching chats and emails between one and the other. 

According to Microsoft, overall work output has increased by 13% since March 2020 and corporates have also become more efficient by using software-as-a-service while using, or hiring, AI facilities to crunch the data which used to be processed by humans. 

According to Microsoft, people have raised their attendance of meetings on Zoom, and elsewhere, by 250%. Coding, email and writing are getting pushed to later in the day, as managements put pressure on staff to attend meetings during the day and manage cross-border communications in awkward time zones.

Companies are increasingly tied to their tech providers. And this is not just the case in Western offices.  You see it in emerging markets, led by China and India, and at home, where technology is set to become ubiquitous through Alexa and the internet of things. You can also see the process forging a durable boom in venture capital, where money remains available to back the brightest and best, despite some setbacks in valuation.

But VC companies will need to work hard to match the operating leverage enjoyed by big tech, as a result of its extraordinary success in building a global client base via cheap access to the internet and inexpensive debt. 

Following an overdue collapse in exuberance, Netflix has suffered a 41% share price collapse this year, but domestic cost of access, at $9.99 a month, remains highly competitive and surveys suggest its 220 million subscribers are staying loyal.  The same is true for Zoom, down 41%, following a worse fall in 2021, despite the strength of a brand commonly used as a verb and 300 million users. 

Twitter has evolved into a rolling news service for its 330 million users. Conspiracy theories surround Elon Musk’s decision to buy a 9% stake. But perhaps he just thinks the shares are cheap. 

Meta Platforms is down 35%, due to criticisms by regulators and politicians. But Facebook’s 2.9 billion active subscriber base remains the largest in the world. It is becoming less popular with younger users but older users are signing up. Meta can also recapture younger users on Instagram, What’s App and (potentially) its version of the metaverse, an alternative 3D reality, where your avatar can boost your attendance of meetings even further.

Amazon is only down 10% due to the extraordinary strength of Amazon Web Services which offers its clients access to cloud services, alongside the company’s retail and entertainment site. Activist investor Dan Loeb of Third Point is a big investor and says Amazon’s $1.6 trillion market value stands at a 40% discount to its underlying value. Current cash flow forecasts are impressive and the company plans a $10 billion share buyback programme.  

Alphabet has also trimmed its share price fall to 10%, as the company found a new direction through the $5.4 billion purchase of cybersecurity company Mandiant. The company has also pressed ahead with buybacks. Analysts agree that YouTube, Google’s cloud services and Google search are worth more than its market value.  Google is a leading exponent of AI and using it to expand its driverless car and healthcare services. 

No one should be complacent as recessions loom, Covid-19 stalks China and the war in Ukraine continues. Expect the unexpected. Nvidia (down 27%), for example, has just come unstuck thanks to a sudden fall in its profits from microchips. But society and technology are continuing to integrate their operations, and it is going to be pretty tough for even the most determined antitrust legislator to call a halt to the process. 

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