Nutanix story

<<,or are you meant to say software defined infrastructure?>>>

I am not sure there is much difference. The servers in the data center are networked together, and thus SDN. But yes, the marketing is software defined infrastructure. The goal is to make the data center a utility instead of an extremely complex to manage disparate groups of servers. Nutanix is server agnostic, so it works as well with a Cisco and Dell server, as if they were one and the same.

But yes, infrastructure would be more accurate.

Tinker

mauser? duma?

Thanks for this thread. I get it now with NTNX, at least sufficiently to start buying (shares and calls) and selling (puts). Now I need to jump back to reviewing NPI for additional info that might expand on what you’ve said here.

From a short term trading perspective, the “safest” time to buy would be on the retrace to that breakout which puts it around $30 and change. – duma

Do you expect that due to the short term revenue hit during this transition period? Or strictly on a technical basis?

Thanks again.

Rob
He is no fool who gives what he cannot keep to gain what he cannot lose.

I am not sure there is much difference

They are different. A converged system, is a system that brings compute, storage, and the network to connect them all tightly integrated into a single architecture.

Software defined network, allows you to create networks, subnets, VLAN’s, firewall rules, policies, ACL’s etc through a portal via simple policy statements. Basically all network services can be configured through software and typically provides self-service interface or portal. Basically this allows the network administrators control the traffic from the console without touching a switch, and you can perform these functions without worrying about server and storage connectivity, etc.

Now software defined infrastructure provides virtualization services for the server, storage and some connectivity between these resources and for some of this it leverages SDN’s.

For a converged system the complexity on these are somewhat limited because the compute, storage and network resources are engineered together often on a single frame, with a single back plane.

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HP bought out the next largest competitor to Nutanix, and they have had little luck selling it.

HP and HPE (HP Enterprise) are two different companies. It is HPE which bought the simplivity. I know HPE doesn’t break out their revenue, but from what i heard from their enterprise group, simplivity is a gaining traction.

I also thought NTNX wants to move away from its hyper converged systems.

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so NTNX is not a monopoly but part of a duopoly

There is a strong powerful competition is emerging with a huge potential, balance sheet, install base, etc. I guess in 12 to 18 months, NTNX will be easily pushed into 3rd spot.

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<<<I know HPE doesn’t break out their revenue, but from what i heard from their enterprise group, simplivity is a gaining traction.

I also thought NTNX wants to move away from its hyper converged systems.>>>

I you mean “gaining traction” in not losing any more marketshare, then that may be the case. But HPE bought Simplicity for a mere $650 million, at the bottom of the price it wanted, and it has been going nowhere.

Yes, Nutanix wants to move away from converged systems, not because it does not want to be there, but it wants to move the market forward beyond hyper-covergence to create indistinguishable virtual data center to cloud virtualization and the network as a utility functionality the is hardware agnostic (which is what is killing Cisco, which is what HPE does (they sell hardware), which is why DELL loves Nutanix despite always owning VMWare as Dell just wants to sell servers.

Again, my issue with Nutanix is pricing power for a product that is so highly regarding with customer satisfaction. It is perplexing that such a product cannot produce cash.

A huge risk factor going forward is if Nutanix could not monetize its market leadership position in hyper-convergence, then how is it going to monetize the next stage in the software evolution that it has envisioned?

It would seem they want to establish as large a foot print as possible, and then at some point be able to turn of the sales and marketing expenses to get there.

As such, for me, too much of Nutanix is in the “visionary” stage of what might be vs. what is such as Arista and Nvidia are at, even though both have future visions, and future markets that are not yet ripe, their current business leadership is evidence here and now by real world evidence, where as Nutanix is a vision that they have.

Given that Nutanix currently has I think 8000 or more enterprise customers, and that is starting from 0 in 2010, it has an incredible pedigree of success that no other company that I can think of in the enterprise space has ever created in such a short period of time. But perhaps they also got there because they do not charge enough for their product. As I again harp on the lack of ability to print any cash.

Many will tell me that is not important now because of land and grab, yes, yes, but that works best for a consumer focused company. Most business focused companies that are successful make cash flow early on as businesses pay for value.

Tinker

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<<<There is a strong powerful competition is emerging with a huge potential, balance sheet, install base, etc. I guess in 12 to 18 months, NTNX will be easily pushed into 3rd spot.>>.

This is ridiculous speculation. Exactly whom will come up and knock the clear market leader down? Why do you think this? And how told you this, your contacts at HPE? They have 8% marketshare at best, and much of this is in convergence, not hyper-convergence.

Kingran you are losing me here. If you have specific information and analysis let us know. Otherwise this is rank speculation with no substance to back it up. And that is misleading. On this board we provide our reasoning to our conclusions, not toss out wild statements that have nothing to back them up.

Thank you for sharing the substance of this opinion in advance. And frankly, the fact that it is brought up actually gives me more confidence in Nutanix, as this is the sort of blunt and unsubstantiated statement I have heard 10s of times from losing competitors who bad mouth the market leaders.

Tinker

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which is why DELL loves Nutanix despite always owning VMWare as Dell just wants to sell servers.

Through EMC purchase Dell also owns VxRail, which is growing fast and challenges Nutanix on marketshare. Your above statement is inconsistent with that reality.

Given that Nutanix currently has I think 8000 or more enterprise customers, and that is starting from 0 in 2010, it has an incredible pedigree of success that no other company that I can think of in the enterprise space has ever created in such a short period of time

Not a fair competition but Azure started in 2010, currently does $15 B annual run rate with close to 30% growth. Microsoft is such a giant it may go unnoticed. But their share price clearly tracks the growth of Azure.

Many will tell me that is not important now because of land and grab, yes, yes, but that works best for a consumer focused company

I agree. Now circling back to my original question, why you think switching cost is high? If that is a false assumption, entertain that thought for a second, then if someone can come with a differentiated product that offers a better value, and a has huge enterprise presence to begin with, sales infrastructure in place, deep relationship with IT procurement, IT leadership, how quickly this land grab will vanish? We know it can vanish in hurry, but will it vanish in 4 to 6 Qtrs? Does Nutanix has a compelling product to fight back, do they have cash chest? do they market permission? investor permission?

The line between “rank speculation” and a vision is so thin…

Good luck with NTNX

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Kingran,

You may know software but you do not know this market.

Nutanix already integrates with Azure, and Microsoft will only use Azure and not be agnostic.

Further, the $15 billion run rate for Azure is utterly irrelevant as Nutanix is not a cloud provider (as all of that $15 billion is pure cloud) but an enterprise integrator between data center and cloud so as to make them indistinguishable. No enterprise of any size is going 100% cloud, and most would not go 100% Azure eithe even if they did.

Azure is not going to become #2 in this market, and if you calculate marketshare by correctly assigning hardware that is sold with Nutanix on it and not giving De… EMC credit for all the hardware regardless of VMWare or Nutanix on top of it, Nutanix is still clear #1. Nevertheless EMC/VMWare has been growing faster. There is no on else even close or relevant in the market at this time. HPE basic failure in the market - so much so that HPE put out a press release emphatically indicating that they do not and will not support Nutanix and that customers should buy their system (which they are not and instead buying servers from HPE and putting Nutanix on it despite HPEs efforts to discourage this), NTAP is starting their own roll out but is hardware centric, customers have been putting Nutanix on Cisco servers despite Cisco saying they will not support it.

I am not saying Nutanix will be a good or not good investment. I have expressed my concerns, but no, Azure will not be moving up to the #2 position, neither surpassing or challenging either VMWAre or Nutanix.

Tinker

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You may know software but you do not know this market.

LOL. It is not about me.

You are just all over the map and it is bit difficult to focus the conversation. Let me try one more time. You started with the premise “switching cost is high”. I think you really don’t believe in that either. Switching is not difficult and not expensive.

Now, the next point you argued is NTNX is the leader and the only competition is VMWare. Dell with VMWare and EMC VxRail actually has higher market share than NTNX and you characterize that Dell is just happy to sell boxes.

Now the third assertion is Azure is not a competition.

Like I said, Good luck with your NTNX.

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Like I said, Good luck with your NTNX.

Kingran,

Tinker doesn’t even own NTNX, but your comment still seemed a bit passive aggressive to me. Maybe I’m wrong, but I have found your approach to be a bit abrasive.

Chris

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FWIW, I have been asking the Progress DBA community about their experience with this class of product. Now, admittedly, the focus on Progress may distort the sample, but there are lots of multi-terabyte databases and multi-thousand users in virtually all countries in the world in this sample, so it is not trivial.

The first observation is that, empirically, these people are running into Nutanix in a limited number of sites versus VMWare and proprietary solutions in a significant number of sites. Admittedly, this could be because of the specific technology, but it makes me wonder about the market characterizations.

The second observation is that virtually every site is experiencing performance issues. Almost universally, the decision to use this type of software is imposed from on top as a cost saving measure, without adequate analysis as to whether or not it will really work for all applications. For word processing, e-mail, spreadsheets, and the like, it works great, but these are all small file sizes, low transaction volume applications.

Where it falls down is large database applications with large user counts and high transaction volumes. Performance sucks. With some work it can be improved, maybe, but it is guaranteed to be much worse than putting the database on direct, internal drives … these days, often SSD if performance really matters.

The solution is simple, if one simply recognizes the difference between small file size, low transaction volume applications and large file size, large user base, high transaction volume applications. Just apply the right solution to each problem class … but the bean counters tend to want to impose a universal, “cost saving” solution.

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The second observation is that virtually every site is experiencing performance issues. Almost universally, the decision to use this type of software is imposed from on top as a cost saving measure, without adequate analysis as to whether or not it will really work for all applications.

How then do you reconcile this with a 96% high satisfaction, high retention rate (70% of existing customers expand their purchase from NTNX), 87% YoY new customer growth rate or promoter score of 90?

IMO, anecdotes are dangerous to investing…we should be seeking more formal unbiased analysis.

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FWIW, I have been asking the Progress DBA

Glad to know Progress is not yet dead.

I am suspicious of the 90+ promoter score. It is done by a third party neutral agency that would have no motive for hyping Nutanix as they do this promoter score for practically all major technology companies and most major companies in general, most of which are larger than Nutanix.

There is an inherent bias in these scores as one can give a selection bias sample to be interviewed, but if that was so, why does not every company do this? Probably because this promoter score is truly a third party neutral who does their job properly to create an objective score.

Nutanix has grown like mad. Literally from 0 in 2010 to 8000 enterprise customers (many the largest in the world) standardizing at least part of their data center on Nutanix.

I still have not reconciled the inability to monetize this success with the net promoter score. That is my real issue in the end with Nutanix. The other is that much of its future is aspirational, “visionary” stuff. Their current business has demonstrated the efficacy of their land and grab model. Get in the account, and the account buys multiples thereof fro their initial purchase. Such a model should demonstrate real earnings leverage. But we have seen very little in regard to earnings leverage.

Given alternatives, and my conservatively aggressive nature pinned in by tax considerations (you know, it is absolutely true if the marginal tax rate were lower I would do more trading and thus pay more in taxes, but is what it is) I have invested in other companies that have futures that are not as aspirational but have similar growth trajectories, less competitive threats, demonstrated cash printing ability, and valuations that are underestimating the future prospects of the company. It has become difficult to make the cut with me.

However, I can indeed see the appeal. Me of say 18 months ago, yeah I would have owned a lot of it after the stock crash. I’ve just become much busier, more passive, and more risk adverse (although that would not be the impression I think from many - but self-perception).

Obviously however I do find following the company enjoyable. Much of what it does however is amorphous, and I have a feeling that its lack of earnings leverage may be related to that. Most B2B companies are profitable if they are dominant businesses, and profitable from an early stage. SaaS companies have been an exception to this usual rule, and Nutanix is a SaaS enabling technology and following the land and grab SaaS strategy, thus its lack of profitability despite it being a B2B company would be consistent with the SaaS strategy that some companies like Salesforce have found to be very successful and is of course the strategy deployed by SHOP.

Twilio has become my example of what not to buy because it demonstrates no ability to have a sufficient CAP to enable it to print cash some day. Thus, absent some change in its fundamentals its story will not lead to long-term great returns. I have not followed it close, but ZEN may be similar in inability to eventually monetize their customer base unless something changes. But Nutanix, it may be something different. But honestly all I can say is I cannot exactly tell, but I will put it in the category that it might, and if so, it has multiples of growth ahead. If not, the market will take care of it soon enough when the next severe shake up occurs. This past two weeks was not it. A real shake out takes those companies like Twilio, that are story stocks, but have an inability to eventually produce cash, and turns their billion dollar market caps permanently into low to mid hundred figure million market caps. That sort of shake out has not occurred.

With some luck it will not occur in the next few years either, but we shall see.

Tinker

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inability to monetize this success possibly a sign that the business may be more commodity like than it appears to be. Or the near opposite, an early stage company going for sales at the expense of profit. Which will never come if anything close to perfect competition exists.

Revenue up from $241 million to $766 million in last 2 years. But losses went from -$126 million to -$427 million in the same time. Losing money with each sale but making up for it in volume??

I like companies with surging revenue and getting very close to profitability. Not further away.

NTNX does pass my criteria of rising stock price in a bull market. An incoming tide is so strong that if a ship does not get lifted it must have some big holes in it. But a leaky ship will be lifted too as long as the pumps can take care of the leaks.

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How then do you reconcile this with a 96% high satisfaction

It is a question of who is being satisfied. The brass that made the buying decision is satisfied because they have achieved their cost savings and control goals … and, if the DB folks are grousing about performance, there must be something wrong with their DB. One sees this all the time in IT, where someone down the totem pole knows what is actually wrong and how to fix it while the folks at the top of the totem pole believe the vendor stories.

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The second observation is that virtually every site is experiencing performance issues.

Tamhas, How do you reconcile this with Nutanix’s 94% approval rating that Tinker pointed out? The highest he’s ever seen for any such company, I think he said.

Saul

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Glad to know Progress is not yet dead.

Keeps trundling along… Stock isn’t very exciting, although it is near all time highs. Latest product is predictive maintenance, very IoT.

The highest he’s ever seen for any such company, I think he said.

AT&T was trying to figure out to compete with Worldcom and Global Crossing in 2000 and 2001. AT&T just could not compete and put up profits like they did.

2002 Worldcom and Global Crossing both went bankrupt. They were using Enron type accounting tricks.

Highest ever
Unprecedented

These are alarm words.

Cheers
Qazulight

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