Reactions to Cloudera’s IPO, prospects – Notebook

There’s lots of opinions on Cloudera’s IPO today. Here’s some that I’ve collected in my notebook.

Not valued high enough?

Despite the share-price being up 20% at close, some negative commentary focuses on their valuation dropping from Intel’s funding round, e.g., from Brenon at 451:

The chipmaker paid up for the privilege, putting a ‘quadra unicorn’ valuation of $4.1bn on Cloudera. Altogether, Cloudera raised more than $1bn from private market investors, making the $225m raised from public market investors seem almost like lunch money.

And then there’s the small matter of valuation. In its debut, Cloudera is only worth about half of what Intel thought it was worth when it made its bet.

The counter-point goes a little something like this (as pointed out by Derrick Harris):

“Much has been made of the huge valuation of that Intel-led round, but that’s all misguided noise,” according to IPO Candy, a website founded by Kris Tuttle, the director of research at Soundview Technology Group. “Intel didn’t make the investment for a financial return so the valuation isn’t relevant.”

Back in 2014, Intel was still smarting from missing the shift to mobile computing and Big Data was a favorite as the next big thing. The Santa Clara chip giant’s bet was placed chasing a strategic return, not so much banking a direct return on investment.

You know, all of this is a little bit of ¯_(ツ)_/¯. As I recall, Facebook’s IPO was all wiggly-woggly. If Cloudera makes a lot of money, gets bought for a lot of money, etc., no one will care to remember, just like with Facebook. Success is the best deodorant.

Their business, finances

Also from 451, earlier this month, a profile of their business:

Cloudera is nearly one-third bigger than Hortonworks, recording $261m in sales in its most recent fiscal year compared with $184m for Hortonworks. Both are growing at roughly 50%.

Since 2008, the company has grown steadily. As of January 31, it reports more than 1,000 customers. However, Cloudera is currently emphasizing and banking its success on what it calls the Global 8,000, which are the largest enterprises worldwide. The company notes that its number of Global 8,000 customers increased from 255 as of January 31, 2015, to 381 as of January 31, 2016, and 495 as of January 31. For the year ended January 31, the Global 8,000 represented 73% of Cloudera’s total revenue, while a further 10% of total sales came from the public sector. The company reports 1,470 fulltime employees as of January 31, a slight increase from its headcount of 1,140 the prior year.

More from Katie Roof at TechCrunch:

Cloudera’s market cap is now about $2.3 billion, significantly less than the $4.1 billion valuation Intel gave in 2014. This increasingly common phenomenon is now nicknamed a “down round IPO.”

In an interview with TechCrunch, CEO Tom Riley insisted that this was not a problem for the company because of the “growth prospects ahead of us.” If it performs well in the stock market, it could ultimately achieve the $4 billion-plus value. Square, which went public in 2015 at half its private market valuation, has since seen its share prices more than double.

(Side-note: comparisons of companies, Square and Cloudera, that have nothing to do with each other except being “tech” – and Square is payment processing, not “pure tech,” at that! – drive me a bit crazy, as listeners know.)

And a quick revenue/spend write-up from her:

Cloudera’s revenue is growing, totaling $261 million for the fiscal year that ended in January. The company brought in $166 million at the same time last year.

Losses were $186.32 million, down from $203 million in the same period the year before.

And, according to Jonathan Vanian: “Cloudera spent $203 million on sales and marketing in its latest fiscal year, up 26% from the previous year.”

TAM

I don’t really follow this space well enough anymore to quickly figure out the TAM: I suspect Cloudera operates in several data and BI related ones.

Cloudera isn’t only Hadoop, but 451 put the Hadoop market at $1.3b in 2016, growing to $4.4b in 2020, with a CAGR of 38.3% between 2015 & 2020.

If you throw data warehousing, BI, analytics, and an injection of the mega-databases TAM together, you get a really big TAM, anyhow. Keep in mind though that one of the traps of (definitionally orthodox) disruptors in this space is lowering the TAM of their respective markets, a la Red Hat in operating systems. I don’t get the sense that Cloudera is on that game plan, but others in the market might be.

Buyers’ plans & needs

With respect to what people would do with Cloudera and others in this space (including Pivotal), here’s a good ranking of the information infrastructure priorities Gartner recently found in enterprises:

info plans survey

Also of public/private cloud interest from the summary of that survey: “Based on survey responses, plans for on-premises deployments for production uses of data will drop from today’s 45% to 14% in 2018.”

Looking forward

People in the tech industry care a great deal about IPO’s like this. We’re all curious what The Market’s read on valuation of enterprise IT business models is for our own benefit, and just a general sense of the health of the sector. There’s also usually people you know at the company, so “yay” for people you know.

One day isn’t long enough to tell anything, though, cf., in a completely different space, that Facebook debut weirdness. People got all excited about Cisco buying AppDynamics because that seemed to show some “healthy” signs that money valued this kind of software/SaaS.

At any rate, people still seem to love the Big Data and such. From Cloudera’s CEO, Tom Reilly: “We’re competing with IBM and Watson, so our customers seeing the strength of our finances allows us to do more.” Think of all the free marketing!

And, Mike Olson (original CEO) adds:

The ensuing years have been remarkable. Our company has grown with the market. The original technology has morphed almost beyond recognition, adding real-time, SQL, streaming, machine learning capabilities and more. That’s driven adoption among some of the very biggest enterprises on the planet. They’re running a huge variety of applications, solving a wide variety of critical business problems.

Our early bet has proven correct: Data is changing the world. In applications like fraud detection and prevention, securing networks against cyberattacks and optimizing fleet performance in logistics and trucking, we’re delivering value. We’re helping to address big social challenges, improving patient outcomes in healthcare and helping law enforcement find and shut down human trafficking networks.

Against that background, an IPO takes on a more appropriate scale. We started Cloudera because we believe that data makes things that are impossible today, possible tomorrow. There’s more data coming, and there are plenty of impossible things to work on. Our journey is only well begun.

I admittedly don’t know Cloudera’s business model too well, but my sense is that they align well with the “have something to sell” model that many open source companies in the enterprise space forget to put in place.

2014 Gartner Magic Quadrant for Data Warehouse and Database Management Systems

As the actual report says (leag-gen yourself here to get a copy): “In 2014, this Magic Quadrant introduces non-relational data management systems for the first time.” Indeed!

Pretty delightful array of products there: the old and the new. For example, mixes public and private cloud (notice AWS is up there), Hadoop and traditional DW.

Hadoop hype update

In many ways the turnaround at the company is a reflection of trends in the broader Hadoop community, which spent much of last year dealing with the fallout of hyped tech claims and false promises. This year, by contrast, some businesses seem to be finally squeezing some real value out of the tech, bringing a new round of enthusiasm (and cash) into the startups involved with the tech.

Hadoop hype update

Avoid Re-Inventing the Wheel When Seeking Big Data Bliss (Webinar)

https://www.brighttalk.com/clients/js/embed/embed.js

Update: here are the slides.

I just wrapped up a webinar with BMC today (the Control-M team that recently added Hadoop support). In my section, I briefly go over 451’s take on what Big Data is and then get into how to start strategically planning how to use Big Data. As ever, I try to be pragmatic while at the same time shiney object obsessed.

You can check out the recording embedded above, or go directly the webinar recording page over on BrightTalk. My slides are in Slideshare as well.

Avoid Re-Inventing the Wheel When Seeking Big Data Bliss (Webinar)

Cloudera’s $740m Intel relationship

Mike Olson of Cloudera on the Intel relationship:

It genuinely is true that the important story here is the commercial relationship we’ve crafted with Intel. We go to market together, and that’s fantastic for us both—we reach many more customers directly and through our partners. We build better software that takes advantage of Intel silicon innovations, and get it into the open source sooner. Our customers get the best product earlier and get more value from their data.

And then Matt Asay to drive the point home:

By claiming $740 million of Intel’s money, Cloudera now has its attention in a big way. The cash is nice, but it’s the relationship that matters.

The official Cloudera press release on the $900m round puts Intel’s stake at 18%.

Also, Matt Aslett over at 451 has an analysis on who Cloudera might acquire with that pile of cash:

While we expect Cloudera’s M&A strategy to be driven by products that complement Cloudera Manager, we also see opportunities for the company to purchase vendors and technologies that complement the core Hadoop distribution. At this level, we are not talking so much about Cloudera wanting to ‘own’ Hadoop-related projects in the traditional sense, but to boost its own talent in key areas as well as bring its resources to bear to accelerate adoption.

Cloudera’s $740m Intel relationship

More on BMC’s private plans

We’re all curious what Dell and BMC are going to do now that they’re private. I hope a lot of “crazy” stuff, myself, otherwise: why go private?

Here are some comments from BMC’s VP Asia Pacific, Chip Salyards:

“With a publically traded company you are on these 90 day cycles so you can’t change from an on-premise model to a SaaS model. You are a little bit restricted in the investments made and how great you can make them.”

“What we really needed to do as a company to get that next phase [of growth] was longer term investments … Our [private] investors want a bigger return [on their capital] … but knowing that they have to make some investments.”

This investment, Salyards said, would be in three main areas: cloud, big data, and SaaS. In addition, the company could also invest in its mainframe offerings. For instance, Salyards said the company would move to offer scheduling on mainframes using Hadoop.

More on BMC’s private plans

Hadoop momentum, and uses

> IDC’s “Trends in Enterprise Hadoop Deployments” report, commissioned by Red Hat, found that 32 percent of companies questioned had deployed Hadoop. An additional 31 percent said they had plans to deploy Hadoop within 12 months, and 36 percent said their Hadoop deployment schedule could go beyond 12 months.

And then, people need more tools to actually do something with the results, in addition to massaging it for the elephant:

> The survey also found that most enterprises process big data both before and after Hadoop processing.

Hadoop momentum, and uses