SM expense grew 41% this Q but grew less in past Qs per management (I have not done the cals but seems like that way in Q1). They say they started increasing SM spend in December. Even if they had sufficient sales if the team has been tasked to sell a lot of new products, explain to the customer the transition from hw to sw and then to subscription model they are bound to lose their efficiency. They should have hired more sales to do all of these. Management was trying too many new things at the same time and clearly blind sided. One interesting they stated was that EMEA grew this year, US did not. EMEA is 1 year behind so they expect EMEA to show the same slowdown next year. Seems like they have some sense now.
Btw if they hit $295M next Q and we assume 10% hw I get sw and support rev growth of 17% which is definitely a sharp slow down but not of the type of NVDA which guided to lower rev and seriously missed as well.
If you look at their investor presentation they call software and support rev as all rev excluding hw. So, it includes subscription
From NTNX’s 10Q
Software and support billings— We calculate software and support billings by adding the change in software and support deferred revenue, net of acquisitions, between the start and end of the period to software and support revenue recognized in the same period. Software and support revenue and billings include software and support, entitlements and other services revenue and billings.
I do not want to give any proprietary information away. For those who are Bert subscribers (and TY Saul for sending me there through your posts here), you should read his email a few minutes ago on NTNX.
I’ve read all the recent posts on this board surrounding NTNX, and keep seeing the words “narrative” “story” and “complicated.” I remember Saul writing about story stocks in the Knowledgebase. Additionally, in many other posts on this board, about avoiding companies that have significant headwinds on the way to profits.
I’ve taken those words to heart, and sold out of my small NTNX position this morning.
I don’t believe the HCI thesis is broken. The Nutanix problem is execution.
HCI solutions affect a lot of different stakeholders in a large enterprise, from business unit App development teams to datacenter types in corporate IT, and everyone in between. The need to ‘get everyone on board’ means selling HCI requires very long sales cycle, often going all the way up to C-suite.
Simple messages are easier to convey than complex messages. Now consider what Nutanix has done… hired a lot of new sellers, most of which probably have no/little experience selling to the C-suite and launched a slew of new products. Their message is much more complex and the sellers have a limited capacity to absorb complexity quickly. I can easily imagine sales sessions where the lead is getting buried and the customers walk away overwhelmed… analysis paralysis. This will be a hard problem to solve but I am holding … and considering doubling down.