Here's What the Market is Missing About Nuta

This board and NPI have really helped me grow as a person and investor. That sounds silly, but its true. I’ve learned so much from so many of you.

I started a trial to test my chops as a writer for TMF and this is my first article. We’ve had a lot of discussion about Nutanix on this board.

I fully realize we could be wrong, but I genuinely believe the market misunderstands Nutanix. It is an exceptional company with exceptional products and management.

Here’s how I tried to sum up my thoughts into an article. I would LOVE your feedback.

https://www.fool.com/investing/2018/10/23/heres-what-the-mar…

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I fully realize we could be wrong, but I genuinely believe the market misunderstands Nutanix. It is an exceptional company with exceptional products and management. Here’s how I tried to sum up my thoughts into an article. I would LOVE your feedback.

Hi Austin, I liked your article a lot. It’s very clear, and I especially liked how you went back years to recount how they originally started selling hardware and software together, and why they did so. Did you get that from talking to investor relations? (Just curious).
Best,
Saul

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Thank you Saul,

That really means a lot.

Management did a Phenomenal job laying out their history and plans for the transition during their Q1 2018 earnings call. I gained a lot of confidence, reading their plan from Q1, then tracking all the way to Q4 and seeing them execute this transition beautifully (faster than expected).

Here’s the docs I used:

  1. https://www.nutanix.com/documents/earnings/2018-q1-earnings-…

  2. https://www.nutanix.com/documents/earnings/2018-q1-earnings-…

  3. https://www.fool.com/earnings/call-transcripts/2018/08/30/nu…

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Austin, I may be wrong, but I think that this is incorrect from your article:

Starting in the first quarter, Nutanix allowed legacy hardware manufacturers to sell its branded hardware directly.

I think that now the hardware manufacturers can sell Nutanix’s software with their own hardware, and that this is what set free Nutanix’s software to grow so fast:

A. Customers were now able to continue with whatever hardware manufacturer they were used to buying from, and buy the hardware from them. And…

B. Nutanix was no longer competing with the hardware manufacturers.

This has allowed their software sales to explode.

Saul

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I really like the article. Very clear and easy to follow.

Congrats on your first article with the Fool! I hope you post in here to let us know about other articles of yours when they get published.

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Saul,

I think this might clear it up. I got that info from CFO Duston William’s comments on their Q1 Call. Here’s what he said:

“First, we will begin the migration away from pass-through hardware related revenue Beginning last quarter, we started the gradual migration away from recognizing pass-through revenue
attributable to the hardware portion of our business. Today the hardware portion of our business is approximately 26% of our total billings. This transition will come in two parts– first, with straightforward changes which will allow us to step aside from most hardware only invoicing by enabling our legacy appliance manufacturers to begin selling the NX hardware directly to our distributors…”

Page 9 and 10 https://www.nutanix.com/documents/earnings/2018-q1-earnings-…

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I can’t parse this sentence:

“At the beginning of fiscal 2018, Nutanix to action to remedy the negative effects of maintaining complete control over its hardware and selling it at zero margin.”

I think just a typo, “to” should be “took”.

“At the beginning of fiscal 2018, Nutanix took action to remedy the negative effects of maintaining complete control over its hardware and selling it at zero margin.”

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That’s right Foodles… I’m still learning how to type.

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Congrats on your first Fool article, Austin! :slight_smile:

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