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Atlassian partners with Slack, exits real-time communication game

The intellectual property behind Stride and HipChat will go to Slack. Atlassian will double down on managing IT teams.

Atlassian is out of the real-time communications game and plans to partner with Slack. The master plan for Atlassian is to double down on IT team management.

In a deal announced with Atlassian's fourth quarter earnings, the company said it will sell its Stride and Hipchat intellectual property to Slack. Hipchat Cloud and Stride will be discontinued.

Atlassian also said it will discontinue Hipchat Server and Data Center and will work with Slack to provide a migration path. Atlassian also made an equity investment in Slack, according to a shareholder letter.

Under the partnership with Slack, Atlassian said it will deepen the integrations between Jira Cloud, Bitbucket Cloud, Trello and Slack. The two companies will also partner on marketing, sales and channel efforts.

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Mike Cannon-Brookes, Atlassian's co-CEO, said the partnership allows the company to focus on its collaboration efforts will leaving the communications to Slack. On a conference call, Cannon-Brookes outlined the rationale behind the Slack partnership.

We will be doubling down on supporting the needs of IT teams across companies of all sizes, what we call the Fortune 500,000. Serving IT departments is an adjacent market we've been serving for years yet we barely scratch the surface of this significant opportunity. This year, you'll see us placing more emphasis on the IT market through R&D investments, partnerships and marketing. Second, we announced that we formed a strategic partnership with Slack. Altassian currently has 2 offerings in the real-time communications market, Stride and HipChat. As we completed our strategic planning coming into fiscal 2019, we concluded that although this market remains large, the additional investment required to compete effectively is unlikely to generate returns to comparable to those of our other products and the opportunities around us.

The partnership is a bit of a reversal since Atlassian made a big push into Hipchat and then spent a good amount of time rethinking communication with Stride. One big selling point of Stride was that it cut down on the noise that plagues Slack. To wit:

In the big picture, however, Atlassian was going to face competition from Microsoft Teams as was Slack. By partnering with Atlassian, Slack will be able to fend off its much larger rival.

Read also: Microsoft says Teams is now at 'feature parity' with Skype for Business Online | Slack tips and tricks: Master the art of workplace collaboration | Microsoft introduces a free version of Teams, going head-to-head with Slack

Atlassian reported a fiscal fourth quarter net loss of $25.9 million, or 11 cents a share, on revenue of $243.8 million, up 40 percent from a year ago. Earnings excluding charges were 13 cents a share.

Wall Street was expecting fourth quarter earnings excluding charges of 12 cents a share on revenue of $233.4 million.

For fiscal 2018, Atlassian reported a net loss of $119.3 million, or 52 cents a share, on revenue of $874 million, up 41 percent from a year ago.

At the end of the fourth quarter, Atlassian had 125,796 customers with 6,638 net new in the quarter.

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As for the outlook, Atlassian projected first quarter revenue of $258 million to $260 million with non-IFRS earnings of 19 cents a share. Fiscal 2019 revenue will be between $1.146 million and $1.154 million. Non-IFRS earnings for the year is expected to be about 77 cents a share.

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