OAKLAND, Calif. -- While much of the economy is taking a beating from the crippling effects of the coronavirus, business at the biggest technology companies is holding steady -- even thriving.
Amazon said it was hiring 100,000 warehouse workers to meet surging demand. Mark Zuckerberg, Facebook's chief executive, said traffic for video calling and messaging had exploded. Microsoft said the numbers using its software for online collaboration had climbed nearly 40% in a week.
With people told to work from home and stay away from others, the pandemic has deepened reliance on services from the technology industry's biggest companies while accelerating trends that were already benefiting them.
Amazon has muscled in on traditional retailers for years, but shoppers now reluctant to go to the store are turning to the e-commerce giant for a wider variety of goods, like groceries and over-the-counter drugs.
Streaming services including Netflix have dampened box office sales for movies in recent years. Now, as movie theaters close under government orders, Netflix and YouTube are gaining a new audience.
Companies were already dumping their own data centers to rent computing from Amazon, Microsoft and Google. That shift is likely to speed up as millions of employees are forced to work from home, putting a strain on corporate technology infrastructures.
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Even Apple, which once appeared to be among the U.S. companies most at risk from the coronavirus because of its dependence on Chinese factories and consumers, appears to be on good footing. Many of Apple's factories are nearly back to normal, people are spending more time and money on its digital services, and Wednesday it even released new gadgets.
"The largest tech companies could emerge on the other side of this much stronger," said Daniel Ives, managing director of equity research at Wedbush Securities.
That's not to say to say major technology companies shouldn't be worried. Advertising, the lifeblood of Google and Facebook, tends to suffer during economic downturns. The stocks of Apple, Microsoft, Amazon, Facebook and Google's parent company, Alphabet, have collectively lost more than $1 trillion in market value from a month ago, when U.S. stocks traded at record highs. And Microsoft and Apple have cut their short-term financial forecasts because of slowing consumer spending.
Beyond the biggest companies, it is more of a struggle. Communication tools like videoconferencing service Zoom are now essential for many businesses, but ride-hailing firms like Uber and Lyft and property-rental sites like Airbnb are seeing customers vanish.
The $3.9 trillion global technology industry will suffer this year, though just how much remains unclear. In December, research firm IDC forecast 5% worldwide growth for sales of hardware, software and services in 2020. After it became apparent a month ago that the coronavirus would disrupt supplies and cut sales in China, IDC said annual revenue might inch ahead at only 1%. That 1% growth now looks decidedly optimistic, said Frank Gens, chief analyst at IDC.
But when the economy does eventually improve, Big Tech could benefit from changes in consumer habits.
While Amazon has changed shopping habits for items like books, getting customers to trust it with groceries has been challenging. Now, as more people are forced to stay home, one of the last strongholds of physical retailing may be coming under pressure.
Michael Crowe of Charlotte, N.C., ordered groceries from Amazon for the first time a few days ago because he didn't want to risk going to a supermarket, he said.
"I could see myself doing it longer term when this is over," said Crowe, 36, who works for home improvement retailer Lowe's.
One reason for Amazon's increase in demand is that shoppers are buying a broader variety of goods. From Feb. 20 to March 15, over-the-counter cold medicine sales rose ninefold on Amazon in the United States from a year earlier. Dog food orders increased 13-fold, and sales of paper towels and toilet paper tripled, according to CommerceIQ.
Government officials in Europe even called Reed Hastings, the chief executive of Netflix, to ask if the company could reduce the video quality of its streams to lighten the strain on the region's internet network. The company agreed to do it for 30 days. YouTube also agreed to suspend streaming of high-definition video in Europe for a month.
Microsoft has aggressively pushed its new business messaging and collaboration tool, Microsoft Teams, which competes with independent company Slack. On Thursday, Microsoft said the number of users on Teams had grown 37% in a week to more than 44 million daily users. There have been at least 900 million meeting and call minutes on Teams every day.
"We believe that this sudden, globe-spanning move to remote work will be a turning point in how we work and learn," wrote Jared Spataro, a corporate vice president at Microsoft.
Business on 03/25/2020