NTNX my thoughts

so I slept on it, finally had a chance to go through the whole conference call. A few points

  1. they are in the midst of switching from a forklift model to a subscription model. This will lower their revenue in the short term because now peoples payments are spread over time. We should see this an increased in deferred revenue, calculated billings or remaining performance obligations (RPO). Initially losses are going to be higher, (which we saw), billing to revenue ratio should tick up (it is), deferred revenue should increase (it is).

  2. They are in the midst of transitioning away from recognizing hardware revenue. Next quarter things would have been getting better if not for this current giant fiasco. I wrote about that here. https://discussion.fool.com/when-does-the-thesis-play-out-ntnx-3…. Basically over the next 3 quarters they were completing their switch away from passthrough hardware for each corresponding quarter a year ago so each comparison should get better and better. This should have a positive trajectory over the next 3 quarters.

3)Sales and lead generation is going to take longer than one quarter to fix in my opinion. You can’t train someone and generate new leads in 3 months. Others probably have a better idea but I’m guessing 6months to a year minimum.

  1. Someone I was talking with called this quarter, “an own goal” meaning they have caused they scored on their own goal…or are causing their own problems… They have very publically set themselves to certain standards. 3 billion in billings by 2021, rule of 40 (revenue growth + FCF margin => 40) and they are probably going to miss all that. 1, 2 and 3 should have been easily recognizable but I think they were trying to reach quarterly goals instead of doing what was right for the business…or they just didn’t see it which is a whole problem in itself.

  2. Finally, I’m not sure the HCI market is as strong as we thought it was.

I’m selling most of my NTNX, I’ll have a look at them each quarter but for now I’d rather have my money elsewhere.



Got up at 4am pre-market time West Coast and did the same. And then it dropped another 9% when the market opened.

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I was wrong too…

listened through the CC, it feels like bad dream…

I always suspected that NTNX hidden growth is may be couple of quarters away but I didnt expect them to come and show that they cant manage sales funnel. Thats just sleeping on the wheel…

I cant believe this company with so many irons in the fire, supposedly market leading products come in and say they have lead gen problem.
That just means their products are not that market leading and competition is proving much tougher…

Its possible that they will start growing back in a couple of quarters from now, may be they will pull out a SPLK or TWLO, but that will have to be a speculative options play, not putting in 7% position size that I had till y’day.

I am selling most of my NTNX starting today to over next few weeks. (hoping for a bit of bounce from 30%+ drop this morning)

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I sold at the open since after reading the earnings call transcript twice it was blatantly obvious that Pandey is a talented product guy, but he’s just not cut out to be a CEO as has been proven now.

The board should shift him into a CPO role and appoint an experienced CEO to take his place.

That probably won’t happen since Pandey is on the board himself which is a warning sign that I didn’t pick up on before.

During the previous EC he was pretty useless since he babbled on for ages using every acronym under the sun, but I gave him a pass for that since he’s obviously enthusiastic about the product.

This EC may go down in history as one of the worst ever since it was packed full of bobbing and weaving, half answered questions and an underlying shifting of blame for a nebulous problem to an unspecified person or group.

Nutanix don’t seem to have a COO which is also a problem in my view.

To some extent it reminds me of the situation at NVidia where the CEO is a product guy and is also on the BoD. He’s just not cut out to be a CEO as has been proven two quarters running.

Anyway. That’s my take on it.

Cheers, PB.


Also sold my position right at the opening, so missed some of the current drop - to add insult to injury, I had just doubled it a few days ago. Hubris or karma?.

Put the money into more ENPH (thanks to Putnid for reminding me:-), and half positions in Smartsheet and Coupa. Also sold Square position.

I feel like I’m turning all the knobs on my audio system at once this morning.

As the old joke goes “sometimes the bull wins”



Hi Jeff - any particular reason to sell Square? Just wanted to see if it was something with the company’s recent earnings/trajectory, or just needed to raise cash?


Nothing bad, don’t have to raise money, just trying to keep the number of issues in portfolio down (like that might happen:-)


I just realized I posted most of my thoughts on NPI. so let me share a long post comprised of a couple of my takes. Feels like a week already since NTNX announced…gah.

"The biggest takeaway on NTNX for me is that my thesis was that mgmt had pounded the table for almost a year around the “$3b in billings by 2021” and that was modeled exclusively on HCI/Core growth, and did not include the newer Solutions. In the CC last night, they started walking that back a bit, which is telling because I assume the CFO was referring to total of $3b in billings, regardless if it was Core HCI or not. So either the new solutions are gaining very little revenue traction or HCI momentum truly did have a notable hiccup. Either way, broken thesis for me. Because once growth stops, the market assigns a lower P/S, so instead of thinking about a 6-8 P/S when NTNX hits $3b in billings, you are thinking instead of perhaps a 4-6 P/S when NTNX hits $2b in billings. Huge difference in projected mkt cap. Yes, I realize billings and rev are separate, but they track directionally the same.

Why did this lack of execution happen? In retrospect, it is very apparent that NTNX grew due to the laser focus their sales force had on pushing the market-leading HCI solution. To suddenly pivot and expect those same reps to push very different software/cloud solutions was in hindsight a huge miscalculation by mgmt. HCI sells like hardware…I don’t care if NTNX wants to wish away the hardware pass-thru…it sells like an HCI appliance. It is not ServiceNow or Workday or the VDI workload…HCI is infrastructure. Infrastructure will always be less valuable than Enterprise productivity SaaS/software, which is why I was fine with NTNX having “only” an 8 P/S, IF the company executed and hit their $3b in 2021 goal.
So you have a company that was previously executing that really dropped the ball, and you lose faith in mgmt. Very similar to NVIDIA and their CEO Jensen in Nov ER. Once you crunch that smooth sheet of aluminum foil in a ball, you can try all you want to smooth it back out, but it is always going to be damaged. That is how I feel about mgmt now.
Last thing: NTNX CEO purposely expanded the portfolio because he “didn’t want them to go the way of Blackberry” by only having (1) core product in HCI. So I applaud the reasoning and the foresight…he just didn’t properly enable sales to handle the vastly expanded portfolio. Sometimes the reason is that simple.

I sold most of my shares and moved it into AYX, since they are executing."

Here is another take, that is more granular on why/what could have gone wrong with sales and why Nutanix “SaaS” isn’t the same as ZS or NOW or OKTA, etc…, imo:

"Their Core business is HCI. Basically it is sold like a hardware appliance, regardless of whether Nutanix does hardware pass-thru or not.

It is not so easy to land and expand like with Elastic or MDB via developers, or AYX with business owners and data scientists, or with advertisers with programmatic spend on TTD’s platform.

Hindsight is always 20-20, but I should have done a better job pointing out that NTNX core business is infrastructure, and infrastructure is largely an afterthought to anyone outside of IT within the Enterprise. Developers don’t care, for example…they just want access to their workloads when and where they want. The workloads are more valuable, and thus garner the higher P/S ratios.

Another area I probably didn’t hit up enough was that Nutanix is competing, not just against other HCI vendors, but against standard storage vendor solutions and standard server/blade vendor solutions and against converged systems and against the public cloud.

But they were kicking butt, because they were laser-focused, and they simply expanded the portfolio too broadly too quickly. In most sales organizations, whether VARs or Vendors, you have specialist sales people for software vs hardware and further specialized within each.

Selling HCI was akin to selling a hardware appliance. That skillset is very different than selling Beam or Calm or Frame. Different audience too. When you sold Nutanix, you often had to go above the Storage Admin because they make a living being the resident “expert” on whatever standard incumbent storage platform existed (netapp, emc, 3par, hitachi, ibm, etc). So Nutanix HCI reps usually targeted the Dir of IT, or Mgr of IT, or lead Infrastructure contact, or VP of IT or CIO. Most IT reps don’t get a lot of at-bats, if any, with the CIO, in reality. So if you are trying to sell Beam (analyze your multi-cloud app spend) odds are the contacts you had for HCI aren’t the right fit. There is probably a Cloud team or it would be the CIO, or even the CFO if it is all about reducing cloud costs. If you sell Frame, you could be dealing with the legacy desktop/notebook leads and not your Dir of IT contact. Logistics and quality sales approaches really do matter. Yes, you need a good product in the first place. But the CEO admitted he “let chaos reign” which is all we really needed to hear I guess, to explain the lack of pipeline that led to a low forecast.

Amazon is really amazing, when you think this through. The ability to pivot in very different businesses is an art and a science and most companies can’t do it. Even TEAM, a highly celebrated company, capitulated to Slack when they couldn’t penetrate that market with their own project, then did a partnership where they agreed to shutter the competing division.

You can’t just say “we are going to be the O/S for the multi-cloud!” and hope your sales reps just figure out how to make that happen on the backs of an HCI hardware-ish appliance-ish sales motion dna.



Excellent insight Dreamer…
thank you for sharing.

Great analysis Dreamer.

In your opinion, will the industry give this company one more chance to rectify its mistakes or is it all downhill from here? In other words, was the lost opportunity for NTNX taken by some other vendor like RDHT, VMW DELL etc…and if Yes then this would this be the beginning of possible future revenue loss as well.

Thank you in advance.


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Read this on a number of posts in the past 2 days…

hoping for a bit of bounce …me too,


Suggest reading Saul’s post on “better places for money” here (no 52535)…


One thing that struck me… 45MM shares of NTNX changed hands during the dive yesterday 22X normal volume and about 26% of float. Wow.

Still own but not waiting too long to sell.

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But at some price isn’t it worth buying and holding?

I started buying ANET in November at 240 and continued to buy all the way down to 190.

As the market was correcting and ANET was being revalued, I decided it was worth buying the stock as I still believed that ANET has growth ahead as a longer term holding.

I certainly didn’t expect the stock to make the great run back up to 280 in such short order, but hey I’m not complaining.

So NTNX at some price, doesn’t it become a great value if they can get their act together in the next couple of quarters and start showing that they can indeed be a player in the cloud space?

Investing is all about risk reward isn’t it?

So would someone rather buy MDB today at its valuation, or take a chance on a possibly deeply discounted NTNX? I think it’s a coin toss right now on which one has a better return over the next 1 to 3 years.
I mean NTNX still does have the possibility of getting their act together, don’t they?

In 3 months from now it might be that NTNX disappoints further, but that doesn’t mean that MDB won’t be further threatened by AMZN, or that they won’t lose one or two more major customers.

Holding shares of NTNX at 33.00 a share and representing 3% of my hyper growth portfolio isn’t going to kill me if the company fails.



Good thoughts, Chris. I guess it depends on how one views the next investment versus holding.



Chris, it seems to me that the key to your question is why did this correction happen. If, as seems to be some version of the consensus as I read it, the issue is a management problem, wouldn’t one want to see evidence of that management problem getting fixed before buying on price?

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I am with Chris on this on this one. I added at 33.70 on Friday.
Time will tell.

“wouldn’t one want to see evidence of that management problem getting fixed before buying on price?”


For every example for there is an example against. Who knows.

So CMG crashed, they finally hired a new CEO and then people waited to see if the guy could deliver.

By the time he proved he was delivering the stock went up 50%.

Isn’t every stock a risk to some extent? If NTNX was down 5% on the bad quarter I wouldn’t touch it.

Hey it’s a gamble, but I can’t assume that my other holdings like AYX, TWLO, TTD and others aren’t a risk and are just going to climb higher and higher.

I’ll keep my small investment in NTNX for now and see what happens.