The Wall Street Journal - USA (2020-12-02)

A6| Wednesday, December 2, 2020 **** THE WALL STREET JOURNAL.

U.S. NEWS

The prospect of coronavirus vaccines on the horizon has boosted hopes of an end to the pandemic-wrought down- turn—but first the global economy could face a long and difficult winter. Government restrictions and consumers’ fear of infec- tion will continue to weigh on the global economy well into next year, even as vaccine developments offer hope of an end to the pandemic, the Or- ganization for Economic Coop- eration and Development said Tuesday. When the world’s economy does come back, China will emerge as the big winner, according to the research body, accounting for as much as one- third of next year’s recovery, as Western countries slowly shake off the effects of 2020’s record-setting contractions. Releasing new forecasts since a number of pharmaceu- tical companies said their vaccines were highly effective in recent tests, the OECD said governments must continue to provide support to their economies to ensure a speedy re- turn to pre-pandemic levels of activity. “It’s not like we get a vaccine and in a month every- thing returns to normal,” said Laurence Boone, the OECD’s chief economist. The group cut its growth forecasts for most leading economies, citing a recent surge in infections across the Northern Hemisphere that had prompted new restrictions on households and businesses and caution among consumers.

ing venues like the World Eco- nomic Forum in Davos, Switzerland, to champion causes and burnish his profile. He set up Salesforce with a pledge of corporate giving and bought himself an even larger platform with his acquisition of Time Magazine two years ago. Slack CEO Stewart Butter- field has been one of the loud- est voices arguing that companies had to revamp how they use technology. He co-founded Slack, which grew out of a gaming company called Tiny Speck, and pitched its product as an alternative to office email. It quickly took off among developers in technology companies when it be- came publicly available in

He is expected to con-
tinue to run Slack as a unit of
Salesforce after the deal’s
close, the companies said.
Salesforce’s Slack acquisi-
tion is another sign that com-
panies are betting some of the
changes in the workplace
made in over recent months
may outlast the pandemic.
“We really see the world as
fundamentally having shifted,”
Salesforce Chief Operating Of-
ficer Bret Taylor told analysts.
“Slack is really the system of
engagement for every em-

ContinuedfromPageOne

It now expects the global economy to grow 4.2% in 2021, having contracted by the same degree this year. In Sep- tember, when it last released quarterly forecasts, it expected the economy to grow 5% next year. The OECD cut its forecast for economic growth in 2021 in the U.S. to 3.2% from 4%, and its forecasts for the eurozone to 3.6% from 5.1%. It left its growth forecast for China at 8%. Those forecasts are based on what Ms. Boone said was a “cautious” view of the logis- tics of manufacturing and de- ploying vaccines, as well as levels of take-up in populations that may be skeptical about safety. The OECD expect most economies to be operating un- der some form of constraint until the final months of 2021. “For most of next year, we will have to rely on nonphar- maceutical interventions to keep on living,” Ms. Boone said. In the U.S., manufacturing companies continued to report activity growth in November, according to surveys of purchasing managers released Tuesday, marking the seventh straight month of growth fol- lowing a contraction at the be- ginning of the pandemic. The Institute for Supply Management’s manufacturing index declined in November to 57.5 from 59.3 in October. A separate manufacturing survey by IHS Markit put the U.S. at 56.7 in November, up from 53.4 in the previous month. Readings above 50 indicate activity is expanding at manu-

facturers, while those below 50 signal contraction. “There is some concern in the report here about future demand,” said Tim Fiore, who oversees the ISM survey of factory purchasing and supply managers. He cited factors such as the coming holiday period and issues related to the coronavirus, including worker absenteeism and pandemic fa- tigue. The OECD said the pace of the global recovery would continue to be very uneven across countries. In the final quarter of 2021, China’s economic output is expected to be 9.7% higher than it was in the final

three months of 2019. By con- trast, Argentina’s economic output is forecast to be 8% lower. U.S. output is expected to recover to its pre-pandemic level by that time, but the eurozone’s output is projected to be 3% lower, and the U.K.’s 6.4% down on the final quarter of last year. According to those projec- tions, China will account for roughly one-third of the in- crease in global economic output next year. Ms. Boone said the pandemic appeared to have accelerated China’s rise as an economic power. “There is a rebalancing in the global economy,” she said. The OECD said the world outlook remained highly un- certain. A more rapid deployment of effective vaccines could boost global growth to 5% in 2021 and 5.5% in 2022, while a slower deployment would weaken the expansion to 1.45% next year and 2.2% in 2022. The Paris-based body pro- vides policy advice to its members, which include the U.S. It urged governments to continue helping the neediest households and businesses and provide broader-based stimulus to boost demand and speed the rebound. Ms. Boone said the OECD’s forecasts assumed fresh fiscal stimulus in both the U.S. and Europe, adding that it would be a blow to confidence not to provide it. “It would be reassuring for businesses and households to know we have learned from the last crisis,” she said. —Harriet Torry contributed to this article.

BYPAULHANNON

Before Vaccine, a Hard Winter

When the global economy does come back, China is expected to be the big winner. A lithium battery factory in Anhui province.

CHINATOPIX/ASSOCIATED PRESS

Projected GDP 4Q 2021, change from 4Q 2019

Source: Organization for Economic Cooperation and Development

–5 0% 5 10 China South Korea Indonesia World Turkey Russia U.S. Australia Saudi Arabia Japan Germany Canada France Eurozone India Brazil Italy South Africa Mexico U.K. Argentina

ployee, every partner and for every customer interaction.” The purchase, which still has to clear Slack shareholder and regulatory approval, would underpin Mr. Benioff’s effort to move Salesforce be- yond its core product, which helps companies manage their customer relationships, to pro- viding the software tools that businesses need for a swath of their day-to-day operations. The deal also opens a new front in Salesforce’s battle with much larger rival Micro- soft, which has been pushing to be the go-to software ven- dor for businesses, offering a range of applications from data storage to video commu- nications. The Redmond, Wash., company introduced its Teams software suite in 2016

with Slack-like chat collabora- tion features. “Salesforce and Slack will shape the future of enterprise software and transform the way everyone works in the all- digital, work-from-anywhere world,” Mr. Benioff said. Early in the pandemic, Mi- crosoft Chief Executive Satya Nadella said businesses were overhauling how they operate. “We’ve seen two years’ worth of digital transformation in two months,” he told analysts. Salesforce and Slack, both based in San Francisco, have long competed with Microsoft. In 2016, Salesforce, after it lost out to its larger rival in buying LinkedIn Corp., urged regulators to examine the pro- posed deal on antitrust grounds. The transaction ulti-

mately passed regulatory scru- tiny. And this summer, Slack filed a complaint with the Eu- ropean Union over alleged antitrust behavior by Microsoft in using its market dominance to push Teams. Slack shareholders are due to receive $26.79 in cash and 0.0776 Salesforce share for each share of Slack stock. That equates to $45.52, based on Salesforce’s closing share price Tuesday, or more than 50% above Slack’s closing price the day before the Journal broke news of the talks last week. The $27.7 billion price is so- called enterprise value, which typically includes net debt, and is based on Salesforce’s closing price Monday. Slack went public last year through an unconventional method called a direct listing. In recent months, Slack failed to spark the kind of investor excitement enjoyed by other business-software companies more closely associated with the boom in videoconferencing, such as Microsoft andZoom Video CommunicationsInc. Also Tuesday, Salesforce posted earnings for the quarter ended Oct. 31, with sales of $5.42 billion, up from $4. billion the year prior, generat- ing net income of $1.08 billion. The company lifted its full- year sales outlook to $21. billion to $21.11 billion. Slack reported fiscal third- quarter results Tuesday, post- ing sales of $234.5 million and a net loss of $68.4 million, compared with sales of $168. million and a net loss of $89. million a year earlier.

Salesforce

Agrees to

Buy Slack

Purchase Power Salesforce, which confirmed its purchase of Slack Technologies, posted an uptick in revenue in the third quarter.

Salesforce’s quarterly revenue Stock performance

Source: the company (revenue); FactSet (stock)

S&P 500

Salesforce

Slack

Note: Fiscal year ends January 31, 2021

$

0

1

2

3

4

5

billion

FY2019 2020 2021

100

0

25

50

75

%

Jan. Dec.

A federal vaccine advisory panel recommended that health-care workers and residents of long-term care facilities be the first to receive any Covid-19 vaccine doses from the limited supply that will be available initially.

The panel, which advises the Centers for Disease Con- trol and Prevention, voted 13- on Tuesday in favor of giving the first vaccines to about 21 million health-care workers and three million residents of long-term care facilities. Health experts have long expected that the panel would recommend health-care workers get first dibs, but some federal health officials have been advocating including those most medically vulnera- ble to Covid-19. Federal officials have said they expect there will be about 40 million doses available in December. The initial vaccines available are given in two doses three or four weeks apart, so there may be enough for 20 million people to be vaccinated in the early weeks. Supplies are expected to in- crease during 2021. U.S. health regulators are expected to decide in the coming weeks whether to authorize the emergency use of two Covid- vaccines, one from Pfizer Inc. and BioNTech SE and another from Moderna Inc. The companies have been manufacturing doses, but it could take several months to make enough to vaccinate the broader population. The CDC usually follows the recommendations of its advisory panel, and if they are ac- cepted by the agency’s director and Secretary of Health and Human Services Alex Azar, they will become official CDC

ByPeter Loftus,Jared S. Hopkins andBetsy McKay

policy. A CDC spokeswoman said CDC Director Robert Red- field will likely make the deci- sion on Wednesday. Mr. Azar, who has sup- ported early vaccination of nursing-home residents, has said state governors may make final decisions about whom to vaccinate first with the doses that the federal government allocates to them based on their adult populations. States wouldn’t have to fol- low the CDC recommendations, but state and local authorities are expected to rely on them as guideposts for deciding who gets the vaccine first. The CDC panel, an outside group of medical experts known as the Advisory Com- mittee on Immunization Prac- tices, held an emergency meeting Tuesday to consider how to prioritize which groups are most in need of receiving the initial doses. Also Tuesday, Dr. Redfield told members of the White House’s coronavirus task force that the CDC was preparing to recommend a reduced quarantine period for people poten- tially exposed to Covid-19, according to an administration official. The guidance would recommend a seven-day quarantine for individuals who have received a negative test for Covid-19 and a 10-day quarantine for those who have received no test result, the official said. The developments come as the U.S. is struggling with rising cases and hospitalizations. Newly reported Covid-19 cases began climbing back up after their usual dip at the begin- ning of the week, as hospitalizations hit another high. The nation reported 157, infections for Monday, according to data compiled by Johns Hopkins University, higher than the 138,903 cases re- corded Sunday.

Panel Recommends

Health Workers

Get First Vaccines

Daily U.S. deaths Daily U.S. cases 1,172 new deaths

157, new cases

205, peak

2, peak

7-day average is greater than the 14-day average.

Wash.

Ore.

Nev. Calif.

Alaska

Miss.Ala.

Tenn. N.C.

W.Va.Va.

Pa.

N.Y.

N.H.

R.I.

Note: As of Dec. 1, 6 a.m. ET Source: Johns Hopkins University

Where the cases are rising

7-day average

by

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The Wall Street Journal - USA (2020-12-02)

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