Nutanix CEO and co-founder Dheeraj Pandey to step down Nutanix has announced co-founder Dheeraj Pandey will retire from his chief executive role once a replacement has been found. On the IT goliath's quarterly earnings call on Thursday, Pandey said that growing the company “meant putting everything else in life on the back-burner.” Lockdown gave him time to reflect. Dheeraj …
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What is with these guys that makes El Reg suspend all logic?
Nutanix built a great product, and was selling it at a great price, yes. This earned them a lot of customers, rightly so. But is it surprising? No. If Tesla "sold" the Model S for $50,000, losing $30,000-$40,000 per car, EVERYONE would drive one. You'd be stupid not to!
There was a lot of speculation about mysterious government agencies being huuuuge customers and bankrolling the rest of the operation. Sadly, no. It was always debt, shares as collateral, until there was nothing left to pawn. Let's have a look where the money came from and where it went, shall we?
Company founded in 2009, financed by a convertible note = credit line in exchange for shares. Someone gave the founders money and secured a juicy share of the startup. The going rate is 20% per round, declining per round and "success" of company. IIRC Uber late stage was $2bn for 3%? Anyhoo, Nutanix went through five series after the Seed round:
Seed: 80% left
Series A: 64% left
Series B: 52% left
Series C: 44% left (adjusting for "success")
Series D: 38% left
Series E: 33% left give or take
That's the ones which were disclosed. After that no sums disclosed but it's getting ugly: Secondary market, loans of $500m, venture round, debt financing, and after all that another venture round for $6.5m in September 2016. Huh? What's that?
https://www.crunchbase.com/organization/nutanix/company_financials
Look guys, there are very few reasons why a company would get a loan this small. Most of them are ugly and start with p and end with ayroll.
Ok, so they were burning cash. Shocker in Silicon Valley, I know, right? Then comes the IPO and Hussah! It's raining money! Everyone and their mother is falling for SeekingAlpha KoolAid posters (they are still active) and buying overpriced shares (making VCs and early Nutanix employees rich). See, the one thing you have to know about Nutanix is they build their business on tech but mostly on PR. They hacked the press and infohubs (influencers if you will) to boost their signal and create one of the most fascinating long term pump and dumps.
The IPO. Free money! The VCs cash out and sell their shares, small investors pick up the stock after being promised Nutanix will grow forever. Yes, they are losing money but they'll make it up by selling more! The PR machine works overtime! We are a software company! No, we are a subscription company! Look at the growth, look at how many subscriptions, look how many customers are adopting our hypervisor!
Yet, every quarter money is burned by the truckload. $70m, $100m $150m, $180m, it stabilizes around $200m per quarter for a bit and Wall Street is ecstatic. Then $300m per quarter. Don't look at the losses, we are growing, we are transforming!
Bridgeloans are clamored as "investments". There was one $500m convertible bond loan, then another undisclosed one, rumored larger. Whoa, we are talking real money here. $1.xbn gets you how much of what is left of the company?
And then COVID hits and the economy goes into freefall. In May 2020 Nutanix furloughs 1,500 employees (of 6,000 total) and announces another round of furloughs in August. Yes, furloughs are not layoffs but let's be honest, the reason for the furloughs is incapability to meet payroll.Has anything changed?
This.Is.Brutal. Nutanix probably lost 35% of its employees. The good people have already activated their networks and are gone. So what is really left?
At the same time no sales commissions are being paid out, deferred until further notice.
Now enter Bain Capital, the painted-predator-grin with ultrawhite teeth, perfectly-coiffed-hair, $3,000 suits, chop shop of American Capitalism with an "investment" of $750m and exactly at the same time founder and CEO decides to "spend more time with the family" . Excuse me for a moment while I AHAHAHAHAHAHAHAHAHA
Gents, this was a bailout and takeover for pennies on the dollar. The Bain vultures are picking the carcass clean, chopping Nutanix up for parts (IP and customers) and selling it to the highest bidder. Bain hightails out of town in search for the next lame unicorn. It's feeding frenzy in Silicon Valley.
Many good people spend a lot of energy and passion there. Many customer bought the story hook line and sinker. It was all bullshit, from the very first moment until now.
Superb analysis. What you said about payrolls is spot on. The pay scales in India were through the roof for what they were doing i.e. a management engine on top of KVM. I found it extremely fishy when they announced furloughs considering they were the talk of the town with their insane salaries here. I think the people who are stuck there are fresh college grads with insane salaries awaiting layoffs. If a company can't go through rough times and the CEO bails out in those times it is time to run away from it as fast as you can.
Everyone and their dog is jumping on this management engine bandwagon. There is not much in terms of core technology in most of these companies.
I hear your comments but the core complaint is the suspension of logic and the wholesale swallowing of BS propaganda. $1.3bn in revenue but $870m in losses? Furloughs, layoffs, ...
Yet no word about it. No word about the viability of the business model, the furthest Simon went was quoting the CFO how this is not about cost cutting. I've been an avid reader for 25 years now so please take this as coming from a fan: You have never shied away from sticking in the knife and exposing corporate BS-speak yet with Nutanix it's as if reading Nutanix press releases, sometimes verbatim.
I cannot overstate how disappointing this was over the past years.
Very little I can say that's not going to make you guys defensive and that's not a direction I want to take.
I've been reading this site daily for 25 years and you guys are the reason. I want you to know that.
I also hold the opinion that Nutanix has been fooling all of us, strip mining open source, building a flashy management GUI, and engineering for RFPs. They spent millions on influencing and propaganda and at some point they started believing their own spin.
I can see why their assumed role of underdog taking on the clueless big guys is/was attractive and magical. We all want to believe in miracles, we all want to be part of something special. I do not blame you in any way.
It's also obvious that any naysayers could be brushed off as sore losers and bitter competitors. Yet here we are, a company in tatters and not a single article I read (not just here but CRN, Business Insider, etc) actually analyzes what is going on, where the company really stands, what their future might be.
It's bizarre and it takes a lot of effort and money to keep virtually all infochannels flooded with a narrative at odds with reality. There is a story here somewhere, it might be a pretty big one, but what do I know.
Agreed. They've just "invested" in Virgin Australia. Bain aren't there to run an airline for the meagre profits they sometimes make. Bain are there to make a fast billion or two. Strip the company of any assets, load it up with debt, then get out with said billions. The company will then likely collapse. A replay of what happened to Dick Smith Electronics (Australia), although Bain wasn't involved in that one.
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