NTNX

Cramer just said he’s going to have NTNX on his Mad Money show tonight FWIW.

Rob

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https://www.cnbc.com/video/2019/03/19/nutanix-ceo-going-afte…

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This isn’t verbatim, but basically Cramer asked pointed questions and he dodged them ALL.

Cramer: Investor day will be big – can you explain the lead gen issue to shareholders?

“There’s a flywheel in this business…” [we ignored the idea of finding new customers]

Cramer: Why did you pull back on lead gen when you were succeeding with it?

“I don’t look at this as a zero sum game. …In a large market only 2 things matter, quality of the business and staying power.”

Cramer: CC was…interesting. Could you go over some of your success stories?

“That’s the value of our business, actually, the fact that we start with a single workload. …Our product has become 10x better because of the surface area of geographical presence…it’s not a real duopoly; it’s about growing our market.”

Cramer: Deutche thinks VMWare and Dell are taking share?

“We’ve set our mind to a new thing. Let’s put the flywheel back in, the way things used to be…there’s all these other solo vendors that are non-Dell that want a Switzerland”

Cramer: What exactly is lead gen? How do you invest there?

“Well, it’s about top of the funnel activity, like, looking at inputs…”

Cramer: Is it hard to find good salespeople?

“As the company grows, the ratio of missionaries to mercenaries actually starts to dilute…it’s an at scale problem.”

Cramer: Do you need a partner like Dell?

“We wanna make cloud into software…horizontal integration…cloud has to be exactly like that.”

The guy is just a buzz word factory. Never sure what he’s actually saying. I was going to say they were talking past each other, but that’s not fair to Cramer. I wouldn’t buy a used car from Dheeraj.

Bear

42 Likes

It was confusing, but I think he was saying that they made an error in the past. Instead of plowing money into expanding their customer base, they focused on expanding business with existing customers because it costs less than acquiring new customers.

They realized this was a huge mistake and are now trying to upgrade their salesforce. This includes recent hiring a former Oracle cloud marketing VP.

https://www.nutanix.com/press-releases/2019/02/14/monica-kum…

I agree that his credibility is in question, but I haven’t decided to bail just yet.

Oli (still holding NTNX)

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I agree that his credibility is in question, but I haven’t decided to bail just yet.

I mean no offense, but seriously, if the CEO’s credibility being in question isn’t enough to make you sell, what is?

Bear

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Good post Bear, those non answers sound like those of a politician not a business leader. Platitudes which superficially sound good but are unrelated to the question.
I should have caught it earlier when I looked at NTNX WWW site and still could not figure out what they did.
I won’t be going back to NTNX.

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I mean no offense, but seriously, if the CEO’s credibility being in question isn’t enough to make you sell, what is?

Bear-no offense taken-good question!

I still own INFN and TSLA so apparently it takes quite a lot of bad news for me to sell.

I admit, I tend to believe what people say and often fall for a good story. Apparently I need to be more skeptical and ruthless when it comes to managing my portfolio–my results have not been too bad, but not as stellar as many of the people here.

Oli

Honestly I just watched to interview and although it wasn’t a very exciting interview, quite dull in fact, I didn’t really see two people talking around each other. Cramer asked the right questions and they were answered, although vague at times.

My take is that he doesn’t have a real grasp on finding and building the right team to move forward.

I bought at 33.20 after earnings release, was hoping for a more confident CEO interview to keep me in the stock. At this point I think it’s best to step aside, so I just sold at 39. Too many what if’s and a CEO that doesn’t give me the feeling of confidence.

I also noticed that there was an upgrade recently after earnings came out with a price target of 42. Not exactly a vote of confidence for price appreciation from here.

Chris

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NTNX Investors Day meeting started at 12 EST. Something seems to have lit a match under it. See if it holds, at $40.30 as I type.

Rob

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I am listening
They are reaffirming $3B billings to CY21 instead of FY21 so a 2Q delay which means a 33% CAGR.
Their deal sizes, repeat customer spends are great. But new customer adds were low seeing pickup now.

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Ha, damn it. Nice pop.

What I did right. I bought after earnings at a nice low and held shares, not being influenced by all the negative posts.

What I did wrong. I sold today at 39 listening to the negative posts. :wink:

Seriously, I missed a nice short term pop right after I sold. It could have gone the other way, and I didn’t want to take the risk so I locked in my 18% profit in my non taxable account.

What lesson did I just get reminded of? Block out all the noise and stick to the research and voice that got me into the stock. I should have waited for Bert’s take that most likely will be coming in a day or two to see how he feels about this conference/meeting today.

But if I’m really being honest with myself I would have still sold right now at 42 and moved on.

Obviously they are giving someone some renewed confidence. Stocks climbing.

Best of luck to those still holding.

Chris

They are showing LTV/CAC better than MDB, OKTA. A very interesting chart comparing EV/rev against all SAAS companies. Says they are not hw company. Say 20% operating margins attainable. Feel multiple expansion likely in the next few years as SAAS rev gets to 75%. Nutanix TAM of $180B.

Going back to the credibility issue. I don’t think Dheeraj is trying to obfuscate on purpose. That is the way he communicates. More appropriate as a founder/visionary/CTO as some have commented. I have sold most of mine between 38 and 40. Have a smidgen still. May sell tomorrow. TBD.

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I’m listening, too. CMO says 2/3 of core deals are competitor takeouts from traditional to HCI. Showing $119B TAM for this market.

Customer story (some fed account? over 50M lifetime spend) Largest AHV (HyperViser) deployment… deployed by TWO PEOPLE!? ROIC for customers must be pretty nice.

Maybe the best part about this presentation is the investment competitors info. They put together some charts showing; $NER(Dollar based net expansion rate), LTV/CAC ratio (Long term value to Customer Acquisition Cost), EV/S. From that, it’s a good look at the other investments discussed here. TWLO, AYX, CLDR, PLAN, NEWR, OKTA, MDB, TLND, etc. You can see a good argument that CLDR has room for multiple expansion, not just NTNX. NTNX at 3x! CLDR at 6x. ZS the highest at 18x.

OK, now we might get interesting… talking about the lead generation strategy. 8-10% spend for global/CIO/VP account based marketing. 40-45% on Enterprise/whitespace. So combined 48-55% sales lead based selling. The rest on marketing channels.

They plan to spend more on brand awareness, ugh. I don’t like that. They are showing airports advertising targeting CIO’s. Brand awareness spend is some of the least effective and hard to quantify return, yet CMO is spouting stories of effectiveness of this. I’m skeptical.

Saying they are seeing early indicators of increasing pipeline with new meetings.

It appears they delayed the expectations 2 quarters. I wonder how much of this was to keep the slides and just find-replace in ppt CY for FY.

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The guy is just a buzz word factory. Never sure what he’s actually saying.

That’s reflected in the company’s promotional materials as well. Remember all the “What NTNX really does” threads - needed because of all the buzzwords and no real basic explanation of what the company’s products are.

Dheeraj and the other 2 founders of NTNX are from IIT Kanpur. Only super smart and very focused people in India get into that institution (rigorous testing) after high school - you could literally use the term one in a million for them. One of the founders left and has started another company (not yet public) - he was the valedictorian in their class which means Dheeraj chose good company. In any case, it doesn’t surprise me that he has some difficulty in explaining their technology to commoners. If having a super smart CEO plays any role in the success of an innovative technology company, I wouldn’t bet against this guy.

Paul

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After watching the interview and listening to Investor Day, I didn’t catch anything that would make me question the CEO’s integrity.

I think that they overestimated how much they would upsell existing clients, and pulled back on lead generation spending. They have admitted that, and have ramped up their effort to correct it.

What I take away is that they don’t seem overly concerned with near-term stock price. Pandey made a point to remind that even though they are getting traction, problems won’t be solved in the next quarter.

I completely understand moving on from the stock if you think it’s near-term dead money, or that they have too much execution risk, but they seem to have confidence that they are doing the right things to build a great business.

It’s not a clear buy, but I can see why the price went up during the talk.

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Investor Day Slides are here

https://s21.q4cdn.com/380967694/files/doc_events/2019/03/Dhe…

https://s21.q4cdn.com/380967694/files/doc_events/2019/03/Dus…

https://s21.q4cdn.com/380967694/files/doc_events/2019/03/Ben…

https://s21.q4cdn.com/380967694/files/doc_events/2019/03/Chr…

https://s21.q4cdn.com/380967694/files/doc_events/2019/03/Ind…

https://s21.q4cdn.com/380967694/files/doc_events/2019/03/Sun…

https://ir.nutanix.com/company/events/event-details/2019/Nut…

Sold at 42 today, but will consider later in the year if it pans out according to their strategy

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