Nutanix, a company specializing in IT systems made of simple commodity x86 hardware and software that simplifies infrastructure deployment and management for businesses, filed for an IPO this week. The company management stated that they hoped to go public by early 2017.
Nutanix specializes in an up and coming technology know as hyperconvergence. This is essentially a method of organizing large server systems so that their three main functions, storing data, computing, and networking, are performed on the same SKU. Management of all of these processes is integrated, allowing for smaller systems, more storage space, and faster processing times. Specifically, Nutanix provides the specialized software and hardware that theses systems require.
The company has a long list of large corporate customers that includes
- Activision Blizzard
- Best Buy
- and Toyota.
In addition, it has won some contracts with the Department of Defense.
While Nutanix is hardly a household name, its IPO has already gathered a lot of interest among investors. There has been a lot of talk in the tech world about the possibilities that hyperconverged infrastructure can bring to large companies and government agencies. However, it is important to keep in mind that it’s hard to predict how long hyperconvergence will be the dominant software system.
In fact, the company acknowledged the risk that it’s leading product could become obsolete in its SEC filing. The filing also gave details about the competition the company faces. Nutanix competes with nearly all of the major IT vendors. Industry veterans such as
- and Dell
all offer pre-integrated and hyper converged IT products of their own. Of particular concern is the company’s OEM partnership with Dell. Dell is working towards acquiring EMC, a leading producer of hyper converged software. If the deal goes through, the resulting large company would pose a significant threat to Nutanix, as well as cost it one of its largest customers.
It’s important for potential investors to note that Nutanix has never turned a profit. While this is not unusual for start-ups today, the company has managed to post large amounts of income. In 2013, it reported gross revenue of $31 million. In 2015, it reported $240 million in gross profit. Its net losses, however, have grown dramatically as well. In 2013 the company reported a loss of $45 million. By 2015 that amount had grown to $126 million. in the most recent fiscal year. Obviously, the company’s ability to actually turn a profit is being questioned by many investors.
The ability to post a profit is mostly dependent on the company’s ability to adapt to the market. To start, it has expressed an interest in exploring cloud-enabled hybrid software. This would allow companies to utilize both the benefits of cloud technology and private SKUs.
In addition, the company is looking to diversify their client list by selling services as well as products to companies such as Google, Facebook, and Microsoft. They are focusing on innovations in the field of “Mode 2”, a package of software and hardware features that allow websites to integrate software programs into the user experience faster. Essentially, this would allow users to readily access more digital products.
Katrina is a product specialist for RackSolutions, the market leader for designing and manufacturing custom racking products for the IT industry! You can read more about our company here.