Hyper-converged trashes all-flash: Nutanix out-grows Pure Storage

Nutanix is racing on to the billion dollar revenue mark for next year with a $100m net loss fuelled quarter of growth. Third fiscal 2017 quarter revenues were $191.8m, beating the year-ago’s $114.7m by 67 per cent. That’s faster year-on-year growth than Pure Storage, which yesterday reported a 31 per cent revenue increase to $ …

[Anonymous Coward]

Is it just me or are those revenues tapering off and the losses growing exponentially?

So they have to sell stock or issue stock (not sure how that works) in two or three quarters because they'll be out of cash?

Man, I am getting old. I just don't get these business models. Where does the money come from?

[returnofthemus]

Where does the money come from?

Once you go public you get your very own money printing press

It's called Quantitative easing, ...I think?

[Anonymous Coward]

Twighlight Zone

"Nutanix made a net loss of $112m, again beating Pure’s net loss of $62.4m"

Bleeding cash this bad in the face of stiffening competition, seems unreal to pop the corks and celebrate. Billion dollar sales numbers in the near future and still this far in the red, I truly see the only way for these companies to survive is via aquisition.

On another note, having seen Netapp HCI, Nutanix is in for some stiff competition in the DC workload space.

[Anonymous Coward]

Re: Twighlight Zone

Agree. The problem is not so much the losses as the competition. Nutanix has to compete with half a dozen HCI vendors, the old school infrastructure vendors... and then there is the problem of AWS, Google Cloud Platform and Azure, which is likely to take over most of this infrastructure in the long term... difficult to find a company that isn't already using cloud or has plans to move workload to cloud in the next year or two.

Pure is the same story. Probably a dozen storage competitors for all Flash, then you have the HCI vendors going after the same storage... and then the cloud providers on top.... Tough markets. Competitors are bound to drop out or get acquired over the next few years though.

[mspacey4415]

Re: Twighlight Zone

people need to read the financial statements before jumping to conclusions. Nutanix is NOT bleeding cash. GAAP net losses way overstate cash burn because of all the stock based compensations. Fiscal year to date Nutanix actually has positive cash flow from operation of 8mm. After all the capex thats -30mm outflow. compared to 350mm of cash/equivalent on balance sheet this is minimal cash burn to support the growth

[Anonymous Coward]

Re: HCI - the great distraction of our time.

Stock based compensation isn't free and if it's part of compensation plans to maintain your staff the alternative is to pay them cash. It dilutes share holder value. Only in the valley does it seem people think RSU's grow on tree's. The only case where that liability doesn't come true is if you have people leave in large waves and abandon their options and this is generally what happens when things implode.

[Terry P]

I don't think many people know how companies 'become'; they just think that profit comes like you're running a cornershop and that with just a handful of customers you should be in the black else it's just frivolous spending and you're going to fade away.

It's half true - they spend a lot on marketing, R&D, poaching good employees and all other manner of things. They need to grow their install base, get known, get more systems and more customers.

With that comes happy customers (plus some unhappy customers?) who talk, who move to other companies and buy more and then you have a nice run rate business and most of all those support $$$. Support is cheap because you've already spent the millions (see inception) getting it right and making it easy. That turns into easy profit.

Interesting link someone else posted about how Amazon spent YEARS with losses. They were not 'losing' money, they were investing so heavily in other things that now they're one of the go to shopping/cloud/Home AI/youname it companies out there.

[Anonymous Coward]

Problem, of course, is that for every Amazon, Google, etc that achieves huge scale and profits (although Amazon still doesn't really make any profit, or very little), there are a multitude of companies that never make it to that scale.

If you think about the storage market over the last 20 years, NetApp is really the only provider that has broken out... and that was kind of a special case as they were the only one for a long time focusing on file instead of block. Not the same sort of competition that there is in the all flash market where every storage company is focused on all flash.

[Anonymous Coward]

Amazon vs. Microsoft or Dell | EMC vs. HPE

I think if there is a parallel with Amazon for storage perhaps it is that the next five years will be dominated by the epic battle between two titans, in the case of storage Dell vs. HPE.

Sorry Nutanix and Pure, you might be burning cash like an early Amazon but neither of you on your own will get to the top tier. Lots of interesting stuff happens away from the top tier but it's not the same as the fight between #1 and #2.

[CG_Detroit]

Re: Amazon vs. Microsoft or Dell | EMC vs. HPE

Sorry, I would not go so far to say HPE is a storage titan. They are probably the worst sales org in the top tier.. and that isn't a secret.

[JDeezy]

False equivalency

This is a pretty silly subject. Pure has been around longer than Nutanix and yet, you're comparing this year's numbers side by side. When Pure was the same"age" as Nutanix, it actually had better growth.

Nice attempt to misrepresent Nutanix > Pure. Even if they are, this article doesn't at all prove it.

[baspax]

Re: False equivalency

Correct. And the growth numbers are misleading, too. The rate of growth for Nutanix is falling quite heavily. Just look at that graph, they are running out of steam.

Chris: why does this graph look different than the one you released last quarter?

[Anonymous Coward]

Race to Commoditization

Within the next two years, HCI will become a baked in offering. VMWARE and Microsoft will continue making this a baseline ingredient. When combining that likelihood with a shift to public cloud, the future doesn't look very good.

[JohnMartin]

Runway / Escape Velocity

-Disclosure NetApp Employee, Opinions are my own, not my employers-

Given this is an article about market growth and profitability rather than technology, I've got more questions than comments, which even though they're coming from a competitor employee are genuinely things I'm curious about.

"Nutanix made a net loss of $112m" for the quarter and "Cash and short-term investments of $350.3m" .. assuming their burn rate stays the same or worse (as indicated by the trends on the graph), my assumption is that they'll run out of operating cash within 9 months. I became the director of a business like that once, and my first agenda item at the board meeting was appointing a liquidator because the business was clearly trading insovently. How is this different ?

I suppose they could do another capital raising, or selling some of their issued shares, (I think) but wouldn't that inevitably dilute the shareholding (the reverse of a buyback), hence doesn't the apparent inevitability of that make them a bad investment prospect ? If they can do that, how deep is that bucket before they have to do another capital raising ?

I've also heard (and only half understood) that its OK to keep making losses to gain market share but at some point you need to hit a revenue run rate that allows you to amortise your fixed expenses across that discounted cash flow (or something like that), at which point the path to profitability becomes obvious, but if you don't get there before you burn out your cash you hit the wall .. kind of like running out of runway. I'd heard that Pure's CEO had put that at run rate at $1B, which if true, then based on their most recent results, that would see Pure running out of money before they become profitable.

Of course I know this comes off sounding like a competitor saying "don't buy their tech because they'll run out of money and DIE !!! Just look at Violin !!!!", but from my perspective it really does look like that, having said, based on the recent stock price movements, that the market seems to see things differently, so I'm probably wrong.

Those notions of revenue run rate, projected expenses, time to profitability, and stuff like that are probably in their earnings disclosures, but it would be interesting to me if that stuff was decoded and summarised in articles like this, because it still remains a mystery to me how the "never mind the losses, look at the growth !" thing is justified in terms of financial engineering. I know this isn't Seeking Alpha or some other stock journal, but if you're going to cover stuff like this for the tech audience, it would be really cool to see it explained in a way an IT engineer can make sense of.

Thanks

John

[Sypen]

keep hating

Reading the comments I can't help but remember people predicting their demise since VSAN was announced. "They going to fail because x, they going to fail because of Y" they are still around keep hating

[returnofthemus]

Re: keep hating

My advice would be to hold on to any Nutanix apparel you've been gifted, as it could prove invaluable, I'm not sure Nutanix will be around long enough to reach hate status.

PS I've still got a WordPerfect Baseball Cap ;-)

[returnofthemus]

The industry’s first hyper-converged solution on Power Systems

Whoops, nearly forgot!

An extra-LARGE slice of Humble Pie for Mr. Mellor, if it runs on Linux, it will run on POWER.

Welcome to the Cognitive Era ;-)

[Terry P]

Another point is that Nutanix will absolutely, eventually, out pace Pure. Their addressable market is MUCH larger!

[Anonymous Coward]

According to CRN Nutanix is growing not so much. Cisco overtook them in less than a year. How long has Nutanix been selling? Six years? Seven? And then big ole fat Cisco comes and takes their crown in less than a year? Seriously, the shine is off. Nutanix is the Uber of IT. Big talk, big egos, but no profits, and apparently a recipe that's not even so popular.