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Sunday, July 5, 2020  Spokane, Washington  Est. May 19, 1883
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Zoom booms as pandemic drives millions to its video service

UPDATED: Tue., June 2, 2020

Members of the Vermont House of Representatives convene in a Zoom video conference for its first full parliamentary online session in Montpelier, Vt., on April 23, 2020. (Wilson Ring / AP)
Members of the Vermont House of Representatives convene in a Zoom video conference for its first full parliamentary online session in Montpelier, Vt., on April 23, 2020. (Wilson Ring / AP)
By Michael Liedtke Associated Press

SAN RAMON, Calif. – Zoom Video Communications is rapidly emerging as the latest internet gold mine as millions of people flock to its conferencing service to see colleagues, friends and family while tethered to their homes during the pandemic.

Tuesday’s release of the once-obscure company’s financial results for the February-April period provided a window into the astronomical growth that has turned it into a Wall Street star.

Zoom’s revenue for its fiscal first-quarter more than doubled from the same time last year to $328 million, resulting a profit of $27 million – up from just $198,000 a year ago.

The numbers exceeded analysts’ already heightened expectations, providing another lift to a rocketing stock that has more than tripled in price so far this year. After a big run-up leading up to Tuesday’s highly anticipated announcement, Zoom’s stock gained nearly 3% in extended trading to $213.60 – more than five times the company’s initial public offering price of $36 less than 14 months ago.

The surge has left Zoom with a market value of about $59 billion – greater than the combined market values of the four largest U.S. airlines, which have seen their businesses hammered by the coronavirus outbreak that has dramatically curtailed travel.

“We were humbled by the accelerated adoption of the Zoom platform around the globe,” said CEO Eric Yuan, who co-founded the company nine years ago.

In a sign that its growth isn’t expected to be short-lived, Zoom forecast revenue of roughly $500 million for its current quarter ending in July, more than quadrupling from the same time last year. For its full fiscal year, Zoom now expects revenue of about $1.8 billion, nearly tripling in a year.

Zoom’s boom has come despite privacy problems that enabled outsiders to make uninvited – and sometimes crude – appearances during other people’s video conferences.

The concerns prompted some schools to stop using Zoom for online classes that have become widespread since February, although the company’s efforts to introduce more security protection has brought some back to the service. More than 100,000 schools worldwide are now using Zoom for online classes, according to the company.

But the once-weak privacy controls also helped make Zoom extremely easy to use, one of the reasons it became such a popular way to hold online classes, business meetings and virtual cocktail hours after most of the U.S. began ordering people to stay at home in effort to reduce the spread of the novel coronavirus that causes COVID-19.

Zoom also offers a free version of its service, another factor in its popularity at a time when about 40 million people in the U.S. have lost their jobs since mid-March, raising the specter of the worst economic downturn since the Great Depression of the 1930s.

The San Jose, California, company has always made most of its money from companies that subscribe to a more sophisticated version of its service that traditionally has been used for business meetings among employees working in offices far apart from each other.

The pandemic-driven shutdown turned Zoom into a tool for employees who once worked alongside each other, but have been doing their jobs from home during the past few months.

Zoom ended April with 265,400 corporate customers with at least 10 employees, more than quadrupling from the same time last year.

Although Zoom remains focused on servicing its corporate customers, Yuan is hoping to figure out ways to make money from all the socializing and learning happening on the service, too. Some analysts have speculated that eventually may involve showing ads on the free version of Zoom, although the company hasn’t given any indication it will do that.

If it hopes to continue to expand, Zoom also will likely have to do a better job of protecting the privacy of its video conferences. To help achieve that goal, Yuan has been consulting since April with Alex Stamos, a highly respected online security expert who previously worked at Yahoo and Facebook. Both those companies encountered their only security and privacy problems, too.

Zoom’s success is also drawing stiffer competition from much larger companies, including Microsoft, Google and Facebook.

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