I’m trying to make sense of the light guidance given by management. I have no specialized knowledge of NTNX’s business but I am trying to get a sense if the upcoming shortfall is NTNX specific or if the businesses that they compete in are getting weak. I went to the latest 10-K from 9/24/18 and looked at the competition section:
We operate in the competitive enterprise infrastructure market and compete primarily with companies that sell software to build and operate enterprise clouds, integrated systems, and standalone storage and servers, as well as providers of public cloud infrastructure solutions. These markets are characterized by constant change and rapid innovation. Our main competitors fall into the following categories:
software providers, such as Red Hat, Inc. and VMware, Inc. (“VMware”), that offer a broad range of virtualization, infrastructure and management products to build and operate enterprise clouds;
traditional IT systems vendors, such as Cisco Systems, Inc. (“Cisco”), Dell, Hewlett Packard Enterprise Company (“HPE”), Hitachi Data Systems (“Hitachi”), IBM, and Lenovo, that offer integrated systems that include bundles of servers, storage and networking solutions, as well as a broad range of standalone server and storage products;
traditional storage array vendors, such as Dell, Hitachi, and NetApp, Inc. (“NetApp”), which typically sell centralized storage products; and
providers of public cloud infrastructure and services, such as Amazon.com, Inc., Google Inc., and Microsoft Corporation.
In addition, we compete against vendors of hyperconverged infrastructure and software-defined storage products, such as Cisco, Dell, HPE, VMware and many smaller emerging companies. As our market grows, we expect it will continue to attract new companies as well as existing larger vendors. For example, NetApp has released a solution aimed at the hyperconverged market. Some of our competitors may expand their product offerings, acquire competing businesses, sell at lower prices, bundle with other products, provide closed technology platforms or otherwise attempt to gain a competitive advantage. For example, HPE acquired SimpliVity Corporation and Cisco acquired Springpath, Inc., both of which were emerging hyperconverged vendors, in order to bolster their own hyperconverged product lines. Furthermore, as we expand our product offerings, we may expand into new markets and we may encounter additional competitors in such markets. Additionally, as companies increasingly offer competing solutions, they may be less willing to partner with us as an OEM or otherwise."
Based on the stock price performance of some of the competitors (RHT,VMW,NTAP) they all seemed to have been doing about the same till now. This would suggest that NTNX is or will be losing business to them, (as opposed to there being an industry-wide slowdown.) I don’t have any idea how much NTNX competes with each of the companies mentioned above but I can’t afford another mistake like INFN, where the supposedly “one bad quarter” was in fact actually the beginning of an 80% decline in the price of the stock.
I would love to hear from people who know the business if they think this earnings miss is just a speed bump or the beginning of a period of lackluster performance. One thing that management said that has me worried is that they admitted that they didn’t get the marketing spend right. My gut reaction was that “You’ve been in business for 10 years and you still don’t know how much you need to spend on marketing.”
Thanks for any thoughts.