Motley Fool Money - Is Zoom Video an Acquisition Target?

Episode Date: November 22, 2022

Profitable, and worth more than $20 billion, Zoom Video may also be an acquisition target. (0:21) Bill Mann discusses: - Bob Iger's second day back as CEO - Best Buy, and CEO Corie Barry, defying expectations (again) - Zoom Video shares falling close to a 2-year low - How Zoom could fit well into Oracle's business (12:25) Robert Brokamp talks with Megan McCoy, professor at Kansas State University, about relationships and money.  Stocks mentioned: DIS, BBY, AMZN, ZM, MSFT, ORCL Host: Chris Hill Guest: Bill Mann, Robert Brokamp, Megan McCoy Producer: Ricky Mulvey Engineer: Dan Boyd, Rick Engdahl Learn more about your ad choices. Visit megaphone.fm/adchoices

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Dream the possibility. One well-known business could be the next acquisition target. Motleyful money starts now. I'm Chris Hill, joining me today, Motley Fool Senior Analyst, Bill Mann. Thanks for being here. Hey, Chris, how are you? I almost jumped the gun there. Just, I'm in a rush, apparently. Like me, you're just, you're just excited to get to Thanksgiving, not just for the family and the food, but for the apropos of nothing episode that we're going to be dropping on the dozens of listeners. But that's for Thursday. We got some business to take care of here. And before we

get to Best Buy and before we get to Zoom video, it is day two of Bob Eager's return to Disney. Jason and I talked about this yesterday. No surprise to us that he has already started his reorganization of the business. Any thoughts as you watch all this unfold? You know, there's a lot underneath the surface that we don't have the answers to. I feel a little bad for Bob Chapik in that it has to be remembered that he took over in February of 2020. So he had all of COVID. He basically, they were building Disney Plus as the ship was flying. But ultimately, the plan he was executing was developed under Bob Iger. He didn't change. He didn't change a whole lot. So

you're going to have to tell me a much better story about operational failures or some other failure because otherwise, and I'm a Disney shareholder, we've been one for a long time. Otherwise, this to me is not great. It's not great, Bob. It's not great. Yeah, I think we're both looking forward to the stories that will continue to come out behind the scenes, how all of this unfolded. It'll be news story Thanksgiving over and over, I believe. It absolutely will. The stock of the day is Best Buy. Shares are up 11% after some solid third quarter results. Same store sales declined, but less than expected. And this is probably as much as anything what's moving the stock.

They're raising their full year guidance right as we head into the holidays. Yeah. Yeah, they are also sticking to their holiday projections. Six years ago, Chris, let's call it six years ago. Did you believe you would be talking about Best Buy as anything other than, do you remember Best Buy by this point? If you go back a little further, I mean, certainly you go back 10 years and Best Buy was mentioned in the same sentence as Sears as bricks and mortar retailers that are almost certainly going to be taken out back behind the barn. And six years ago, when CEO Hubert Gilles Lee was executing his turnaround, yeah, I think you go back six years and it's like, is this working?

This seems like this. How is this working? How is this working? We were all so certain that Best Buy was going away. And I was like, holy cow, I think he's pulled this off. Yeah. Thanks for getting my math right. I still called 2019 last year after the pandemic.

So yeah, it was a little bit farther back. But, yes, six years was the first hint that they might, Best Buy might not collapse against the assault from Amazon. They have done a great job, an absolutely great job at Best Buy. And you see it, yeah, I mean, so their earnings for this past quarter were a buck 38, well above expectations, 10 billion dollars in revenue, 10.6, to be precise. This is a company that has that literally, I think from a decade ago, forgot to die. It literally forgot to die. So, Corey Berry, the new CEO, she's been in that seat for a little while now,

has absolutely positively done a great job with this firm, and not only as best by surviving, I think you could say that they're absolutely thriving. I'm glad you mentioned Corey Berry, because if you look at the retail category in general, we're starting to see some separation, the better performing companies sort of separating themselves from the others. And because of that, retailers that are struggling, Look, during the pandemic, everybody had the same set of circumstances. Everybody was able to say, well, look, it's this global pandemic. We're all being affected by that.

Yeah. Let's go buy a television. But if you look at Corey Berry's leadership, and in particular, the way they have dealt with supply chain issues, this is a very long-winded way of saying, Corey Berry is making it hard for other retailers to blame supply chain. Well, and you know what? It's a really good point. And the other thing about Cory Berry is that she, she's very humble about what they know and what they don't know. I mean, obviously, they've managed their supply chain very well, but she is very much aware of the fact that there is no such thing as the consumer. You know, she's speaking about, she's speaking a lot about how certain lower income consumers are seeing a lot of, you know, seeing a lot of, you know, seeing a lot of, you know, of pressure. They are, they're maybe trading down a little bit in their purchases, where other ones are, you know, where other ones have absolutely gone and feel much more confident now than they have

in the past. They've done great, you have to say, in an inflationary environment, which is no easy thing to do. So both humility and competence, I think from Corey Berry and her team, have paid off huge for Best Buy in its shareholders. Third quarter profits and revenue were higher than expected for Zoom video, but shares down 7% today and close to a two-year low after guidance for the current quarter just wasn't all that good. It was, ugh. Here's all you need to know about Zoom, I think.

Zoom spent 135 additional dollars for, sales and marketing versus the same quarter last year, and it generated $51 million in an increase in gross profit. That is a terrible, terrible return on investment. Let me say that again, $135 million spent to bring in $51 million. That's bad. That's not great math. I mean, it's great math. It's just bad for Zoom, right? I feel like I nailed the math. No, you're talking about their math. I'm sorry. Yeah, your math was stellar, as always. You know, you look at Zoom's stock performance, and it's easy to sort of step back and say, okay, basically the stock is where it was before the pandemic, but the underlying metrics of the

business are absolutely stronger. I mean, this is a profitable company. This is a, you know, unlike some of the businesses that we talk about. about that have really suffered in 2022. Zoom is profitable. And I'm curious, to the extent that you have a crystal ball, what do you think their next act is? Because they've made it through the pandemic. They're a profitable business. They are, you know, they've, much like Google, they've become a verb. And so it's hard for me to imagine that the business just goes away. Having said that, it seems like the narrative around Zoom video is more pessimistic than the

underlying business metrics would have you believe. Yeah, that may well be true. And I think that you have to at least have some grace about Zoom's results. I don't know that we will ever see anything more technologically impressive. And I do mean this than Zune's Zoom dealing with a 10-fold increase in customers during a period of time. That Zoom as well went remote in 2020. They actually, you know, you know the old, the old saw of they built an airplane while they were flying it. It is absolutely incredible. Zoom has been deeply, deeply ingrained in commerce in the United States.

around the world. And I don't really think that will change. I do think for Zoom, you have to view its core business as being mature. And so what's the next act for them? I think that they probably have some ways of expanding. I don't know if you saw their deal with AMC, where they want to turn AMC theaters into giant Zoom rooms. I mean, I don't know. That's probably incremental for them. Ultimately, I think Zoom is a takeover candidate. And I think that companies that are acquisitive like Oracle and Salesforce.com would be looking at Zoom as an obvious benefit to have inside their stables. It is interesting to think about Oracle, in particular, acquiring Zoom. if you think about the potential it gives them to go after Microsoft. Because Microsoft Teams is very much aimed at the enterprise segment. And if Oracle were to swoop in and make some sort of a Godfather offer to Zoom video,

it enables them to go after that same enterprise market while still having the consumer market. Like, say what you want about Microsoft Teams. They're not going after the consumer market. No, they're not. They're not in the same way that Zoom absolutely has. And Zoom, for everything else that we talk about in terms of very anemic growth, they carved that niche out of nothing and beat back some really, really impressive competition, not least of which is Microsoft and Microsoft Teams.

We are no longer in the days of the two families, the Bill Gates versus Larry Ellison, you know, Mafia throwdown, if you will. I don't want to use the term Mafia too much, because that doesn't sound great, but you know what I mean. The two families, the level of antipathy that they had towards one another, I don't think that's the case anymore, but I do think that, or,

as an organization should look at a company like Zoom and say, this is a way for us to absolutely compete with Microsoft in another area of enterprise. No man, great talking to you. Thanks for being here. Thanks, Chris. Talking about money with your family can be challenging. So before you have a tough conversation about finances and estate planning with your family, there's an easier one to open with. Robert Brokamp has more.

Over the next several weeks, millions of Americans will be spending time with their families for the holidays. It'll be the perfect time to talk about estate planning and long-term care. Okay, so we don't really expect you to greet your loved ones with a hearty. Happy holidays. Do you have a will? But the weeks that span Thanksgiving to New Year's Day present several chances for you to have crucial financial conversations. That said, talking about money with your family can be, well, tricky. To help us navigate these difficult conversations is Dr. Megan McCoy, who is a licensed marriage and family therapist, as well as professional. of financial therapy at Kansas State, and she's also one of my former professors.

Welcome back, Dr. Bacoy. Oh, thanks for having me. So the first question is more of a general question, and that is, why are conversations about money with family members so potentially difficult? They're so difficult for so many reasons. Our culture has a strong money taboo, whether it's because we have religious beliefs sometimes or cultural beliefs about not talking about money. is also interesting too, because if you have more than someone else, you feel a little guilty.

If you have less than someone else, you feel a little icky. And so only if you're the exact same amount of someone else does it feel comfortable talking about money. Plus, all of us have different views about money. Some of us see it as a source of power or safety or control or enjoyment. And so when we talk about money, we sometimes get conflict from that. So most of us just spend our life avoiding it. From the research I've done on the topic of financial discussions between couples, the research

shows that these are potentially, like the arguments tend to be more intense, more long-lasting. Is that the same with other family members? In other words, is this just endemic to conversations about money in general, or is it something special about conversations with your spouse? I think it's true for all money conversations. is we have so little practice talking about money. We did a study and looked at a data set, and 90% of the people in there had not talked to a single soul about money. And so no one has the chance to practice. And so I think there's an extra level of difficulty talking about money

with your partner because power and control kind of goes into those conversations, but it's really incredibly difficult with anybody talking about money. So let's get into some of the maybe specific topics that you may want to talk with your family. Let's start with perhaps the most un-holidayish of all, and that is estate planning, right? You want to make sure that your stuff goes to the people you want when you pass away as quickly and as efficiently as possible. But it's also important for everyone in your family to have their wills and their trusts and all their other legal documents, right? Otherwise, it could result in delays, additional cost, grease, but maybe also fights over assets and heirlooms. So estate planning really is like a family affair.

So how might someone go about bringing this up with family members? Well, you know, not only is there true financial consequences that people should be aware of and why we should have our estate planning in it, but we need estate plans to make things easy because I think that the stages of grief have kind of gotten to the vernacular of our culture, but anger is a very normative experience when grieving. And family members who have to navigate difficult estate planning processes while grieving are more likely to let the anger out with each other and cause fighting and disrupting. When they really need each other to support and lean on, they're too busy fighting because anger are so natural. So the easier we can make it is a bigger gift to our family members. And the more we can start small and talk about it, in way, way future, it's a lot easier because our fears will be less. So that won't saturate our conversations as much.

So if you start when your parents are quite younger and say things like, how do you want me to celebrate your life? What's important to you in terms of the funeral? What kind of music do you want? Those non-financial-related conversations to make it normative that you respect their desires, their wants, their values can make those financial conversations easier in the future. One idea that I've had in the past is that you just bring up what you do, right? You just bring it up and say like, hey, you know, I recently updated my estate plan. This is who you should call in case anything happens to me.

And that then leads to the conversation where you could say, like, so who should should I call if something happens to you? What do you think of that as a task? I think that's a great idea. I think any time we can keep the roles as they always were, our parents were our trainers, our coaches, our person who taught us thing, let them get into that role of teaching us. And so by saying, what do you think of my plan, it lets them get into the role they're comfortable by saying, oh, that's a great idea or let me tell you what to do differently based up mine. So it's a great way. of circumventing any potential role reversal. That would be difficult.

On a somewhat related topic, right, some of our listeners may be visiting older relatives, older parents over the holidays. And they frankly may see some signs of just cognitive decline, right, which is going to happen to all of us probably at some point, if we're lucky enough to live that long. And you might start to think, well, maybe parents need some help manage their money or just their lives. So how can someone begin that conversation? And it might be with the parents, but it also might be with siblings if you have them. Yes. I think what's interesting about aging is the old adage. Like, if you don't use it, you lose it. So the goal when you start seeing your parents aging is not to take over it and be the caregiver for them, but discover ways to

create safety nets for them. And again, slowly, gradually take on things so that they keep their sense of empowerment while you start the conversation going so down the road as things. get worse, you can offer to lighten their load, and it'll already be normative. I think if you're starting to notice things like unusual purchases, an open mail, lots of discussion about money or physical setbacks and memory problems, you might need to escalate the plan. But at the early stages, the earlier start, the better. We have other family members, and it won't be just parents who may not be making the best financial decisions, right? Family members of any age could be in difficult financial circumstances, or maybe they're just overwhelmed, right? So how could you

have those types of discussions? It could still be with your parents, even if they're not elderly, but it could be siblings or maybe even your adult children. I think it's amazing. One of my favorite subtopics related to this is the idea of how do we scaffold our children to support them or our siblings without enabling. So we don't want to, again, take over everything or get in the position where we have to do things for others because it's like the old saying, if you give a man of fish, he'll eat for a day. If you teach a man to fish, he'll eat for a lifetime. In these conversations, it is about making sure that you believe in them, that you think they're capable, and seeing it as a way is, I want to be there for you if you're

overwhelmed, but I believe in your capability of doing this. And maybe you just need a little bit of my resources that I already have for you and to make it easier for you to accomplish your goals, not for me to do it for you. Thinking of some other things you could talk to folks about over the holidays, I remember actually an assignment that I had in your class. Your class was money and relationships, and we had to write a paper basically about our, I'll just frame it as like our financial history. And there were some things we had to do, like a genogram. I don't know, it was pronounced genogram or genogram? I think genogram, but it seems to work for a family tree. Yes. It's like a family tree and then do a systematic analysis and all that stuff. But what was

most interesting to me was that I actually had conversations with my parents about money and their upbringing. My parents are divorced, and money definitely played a big role in them getting divorced. So to talk about them and their earliest ideas about money, how they learned about money, what they learned from their parents, of course, or my grandparents about money, it was really fascinating. Several aha moments in terms of where I was like, oh, so that's why you are the way you are, and that's why you managed money the way you did. It was really interesting.

Oh, I love that. And those kind of conversations, like, they're money. beliefs, their money attitudes can be the preliminary conversations that get you guys open to having the more logistical conversations about a state or insurance or disability planning later on. But yes, the Gennogram work and discovering the things that were said, unsaid in your family can be beautiful. Any nerds out there, there's an article by authors named Mumford and Weeks, and they had these beautiful questions that you can ask, like, what were your biggest money worries growing up?

Like, how did you navigate that? What does it mean to feel well around money? What would it look like if you didn't have stress about money? Who had power around money in your family growing up? Did you ever feel powerful around money? How do you think families or couples should navigate money? Those kind of questions give you insights on more than just money. It gives you insights in their belief system and power, control, safety, and all those other things.

Yeah, I think I heard it describe that things like finance, financial planning are in the external nuts and bolts of managing money, but the interior is what folks, how they relate emotionally to money and really what drives their decisions. Absolutely. And that interior side of money, those beliefs and attitudes and unsaid assumptions they have about money is how we really connect on a deeper level. I once heard a quote that said, money is the object we project our deepest fears, dreams, and hopes and desires on to.

And I always love that quote because when you are able to talk about money in a hopeful way rather than the scarcity mindset, you get a new level of intimacy. Like, don't tell any of my colleagues in my financial planning department, but my husband and I do a powerball every couple of months because we spend 24 hours talking to each other about what would life look like if money wasn't a worry? What would life look like? How would you fill your day? Where would you be?

What would you be doing if money was not digging? your decisions. And those conversations, oh, just breed so much intimacy and insights on what we value in life. And so, yeah, don't do it all the time. But every once in a while fantasizing about what brings you joy in terms of money, what your values are around money can be rich. I like the fact that it puts a positive spin on it because the research is clear that if you want to have a difficult conversation, scolding and shaming is not the way to go. You're going to totally shut down the conversation. Yes.

The more you get into an antagonistic position with someone, the more cemented they get to their belief because now they're not listening, they're defending. And so the more we can have like a shared, just a desire to understand the other, the more powerful it can be. So you have experience with family counseling, couples counseling, and you've been active in the emerging field of financial therapy. What would you say are some good guidelines for deciding when it's time to get professional help with these issues?

And how do you find the right professional? So I'm like a huge fan of the oil change analogy when it comes to financial counseling, planning, and therapy in general, that if we all treated our emotional well-being and our financial well-being like we treated our car, we would get intermittent oil changes because we would know if we waited until the oil was all gone, our engine would be on fire and it costs a lot more money. So the second you feel stress about your communication about money, about your financial well-being, about your security for the future, that's a time to get help. And honestly, it's much easier than it has been in the past due to COVID. First of all, AFCP is offering free

financial counseling to anybody who needs it and doesn't have the financial means. If you Google pro bono AFCP financial counseling, it'll pop right up. You can see virtually. Also, mental health professionals because of COVID are now allowed to practice more virtually, which makes it a lot easier to schedule. You don't have to worry about a long wait list or driving to a city or something like that. And then I think the taboo around mental health is decreased. We all know in light of COVID that we need to fight for well-being and sometimes a little extra help will let us, I don't know, progress faster than doing it all on our own. Yeah, and that's true of financial planners too. I mean, they've all now built up their businesses to where they can work with people, even across state lines over Zoom and then using things like Dropbox.

So it is easier than ever to get professional help with some kind or another. And it's so important to note that financial planning, the whole education strategy has now focused on psychology of financial planning. So the financial planners coming up are going to be getting CUs and trainings on the interior side of finances, how to talk and listen to. to their clients help them navigate change and when they're feeling stuck. So financial planners, financial counselors, and mental health professionals, I think, can help you in all, I believe in the thing called equifanality, that if you're going to see someone getting a second opinion, getting a time to space, to think, and process,

that in and of a self is going to help you. And in terms of finding a good one, I would really highly recommend making sure your financial planner has a CFP, that your financial counselor has an AFC, and your financial therapist has either a certificate of financial therapy or some kind of higher education, such as K-States Program of Financial Therapy or Mental Health Specialization in it, something extra to make sure that they have some cross-training. So let's get our final question here.

You teach a class entitled Financial Well-Being. So what do we know about the role of money in a person's overall well-being? So we know from this book by Wrath and Harder that there's different pillars of well-being. if one pillar is missing, then we cannot have full well-being. They describe it at things like financial health, emotional or mental health, community, having a sense of a grander connectedness, social like friendships are a partner. You don't need a ton. You just need at least one sound person you can rely on. And then something they refer to as a meaning-making. It can be your career. It could be your family, but some sense of purpose. And then with the,

One of them, including if you don't have financial well-being, you'll never ever be able to get full well-being. That doesn't mean everybody has to be rich. It doesn't mean everybody has to scrooge McDuckett. It means that we have to feel comfortable and safe with our finances. And also, just to give a little plug, we keep on finding out that also we have to give to others and that charitable giving and taking care of our friends and family, that really does bring us more joy than having a lot of stuff. Yeah, so there's various definitions of financial wellness, but essentially it's can you pay your must-pay bills?

Can you cover your week-to-week and month-month bills? And are you saving a little bit for a vision of the future? And then it sounds to me that according to you, it also includes a little bit of charitable giving just so you feel like you have a higher purpose for your money. Yes, I love it. Well, this has been fascinating. Thank you, Dr. Rufgoi, for joining us. Thank you so much for having me.

As always, people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for or against. So don't buy ourselves stocks based solely on what you hear. I'm Chris Hill. Thanks for listening. We'll see you tomorrow.