Atlassian exits business communications space, surrenders to Slack

Key Points
  • Atlassian, which makes a variety of tools for technical workers to collaborate and share information, has announced a collaboration with rival Slack, a start-up that makes a popular messaging tool for the workplace.
  • As part of the deal, Atlassian is shutting down its Slack competitor, Stride, and making an equity investment.
Handout: Atlassian co-founders and CEOs Scott Farquhar and Mike Cannon-Brookes pose for a portrait.

Atlassian, which makes a variety of tools for technical workers to collaborate and share information, has announced a strategic partnership with rival Slack, a start-up that makes a popular messaging tool for the workplace.

Shares of Atlassian soared close to 17 percent in after hours trading on the news.

As part of the deal, Slack is acquiring the intellectual property for Atlassian's Stride and HipChat Cloud, both of which compete with Slack, and shutting them down. Atlassian is making "a small, but symbolically important" equity investment in Slack, the company wrote in a blog post, and with that will exit the business communications space.

Slack will pay what CEO Stewart Butterfield described to Bloomberg as a "nominal" amount over the next three years for the products, which will give Slack more customers. In turn, Atlassian can exit communications, a business that failed to generate as much demand as expected. The companies said they will also work to deepen current integrations and on develop new ones between the Slack and Atlassian families of products

"We're very proud of what the team has built," Atlassian co-CEO Mike Cannon-Brookes told Bloomberg. "But at the same time, it is a crowded space, and there's a pragmatic option there."

The deal allows both companies to focus on areas where they excel, Bloomberg reported, strengthening them against growing competition from Microsoft and its rival product, Teams. Any revenue Atlassian loses from the deal will be offset by Slack's payments in the coming years, according to Bloomberg. 

The companies also said they expect to partner for marketing, sales, and channel enablement. Specifics on those plans will roll out later.

Atlassian, headquartered in Sydney, Australia, made the announcement in its earnings report on Thursday. For the company's fourth fiscal quarter, which ended June 30, it reported:

  • Loss: 11 cents per share, vs 12 cents earnings per share expected, as per Thomson Reuters estimates
  • Revenue: $243.8 million, vs $233 million expected, according to analysts surveyed by FactSet.

Slack has been one of the hottest business-focused start-ups in Silicon Valley in the last five years, and had raised $790 million, including a $250 million round led by the SoftBank Vision Fund, in September 2017. The start-up was valued at $5.1 billion in that round.

Atlassian is best known for its Jira suite of tools, which enterprises use to track software development and IT issues. It also has tools for more general business team collaboration, including Hipchat and Trello, which it acquired in 2017.

Read the full statement below:

Atlassian today announced that it has entered into a strategic partnership with Slack. Atlassian currently has two offerings in the real-time communications market: Stride and Hipchat. With this partnership, Atlassian will exit the communications space. Slack has acquired the intellectual property for Stride and Hipchat Cloud, both of which will be discontinued. Atlassian will also discontinue Hipchat Server and Data Center and will be working with Slack to provide a migration path for customers of all four products.

Atlassian products and Slack already work well together, and the companies will form an even closer relationship moving forward. The companies anticipate deepening their existing product integrations between Jira Cloud, Bitbucket Cloud, Trello, and Slack, and also expect to build new integrations between Confluence Cloud and Slack.

The companies expect to also partner in the areas of marketing, sales, and channel enablement, and will provide more details on these plans in the future.

Atlassian has also made an equity investment in Slack to reinforce the long-term nature and significance of the partnership.

"We are excited to join forces with Slack to target the immense markets for team collaboration and communications," said Mike Cannon-Brookes, Atlassian's co-CEO and co-founder. "The partnership enables us to offer our customers the best of both worlds - Atlassian's leading collaboration products combined with Slack's business communications platform. This decision also supports Atlassian's broader product and investment strategy in fiscal 2019 as we continue on our mission of unleashing the potential of every team."