PVTL and NTNX

Investment Analysis Clubs Saul’s Investing Discussions
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I am keeping my PVTL position relatively small because I own a lot of NTNX. NTNX enables global 2000 companies (primary target market) to use a hybrid pubic cloud an on-premises. PVTL enables global 2000 companies (primary target market) to move application and business functions into the cloud or a combo on public cloud and on-premises. Therefore, I consider PVTL and NTNX as providing complementary services to the same set of customers, making them very similar and subject to the same market risks. So if you own a 16% position in NTNX and a 10% position in PVTL then that’s sort of like owning a 26% position. Too much for me. Since I have much higher conviction in NTNX, I don’t need to own a lot of PVTL.

Chris

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to use a hybrid pubic cloud

Chris, I see where your mind is, on those pubic clouds.:grinning:

Saul

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Along this same line of thinking (and backing it up), I found it very interesting that both companies have apparently either had or landed big contracts with the US Air Force.

Also, their financials mirror each other in some ways, with Saul’s write-ups on both having some fairly considerable parallels.

All that said, I like the near-term/medium-term future for the both companies as they continue growing. Rather than keeping either small, my plan is to have the position sizes of each be relatively comparable to at least have a smidgen of company diversity even if their share price movements will likely be highly correlated.

-volfan84
long PVTL & NTNX, including call options of each (initial Pivotal shares bought this morning in the pre-market)

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Nutanix obfuscates hardware, pivotal obfuscates operating system (layer or two above hardware) to enable micro services.

Quite different animals.

Slightly worried about pivotal now, since gartner assumed that 90% of the people who try to create microservices today will have abandoned the plan by 2020…

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Nutanix obfuscates hardware, pivotal obfuscates operating system (layer or two above hardware) to enable micro services.

Quite different animals.

Sure different but catering to the same customers thus perhaps the same budgets of their customers. If a customer ran into financial trouble and had to slash budgets, which would get slashed first? NTNX will be receiving recurring revenue for ongoing business functions and perhaps additional transitions to the public cloud would lead to future savings. PVTL will also receive recurring revenue but future projects to transition more business functions may get delayed. I would think that a recession might affect future growth of PVTL more than future growth of NTNX (but their sources of recurring revenue (i.e. past completed projects) would be relatively unaffected).

Chris

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Chris, I see where your mind is, on those pubic clouds.:grinning:

Yeah, lots of my money is in the cloud too. Hope it keeps raining like this!

Chris

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I consider PVTL and NTNX as providing complementary services to the same set of customers, making them very similar and subject to the same market risks.

I see where you are going but would counter with:

The concept that large enterprise will have multi-cloud, which is a combo of on-prem DCs and 1 or more public clouds or just multiple public clouds seems almost a certainty. AWS and Azure would have to collapse in order for this not to be true.

Think: cloud as akin to internet. We dont think twice as to whether large companies have an internet presence…it is just part of normal business operations in todays world. Cloud usage is getting to that point…no one is surprised companies are partly or fully using cloud services. Now they need to optimize that to stay competitive.

So i would recommend thinking about market risk as who Nutanix competes with and who Pivotal competes with.

Nutanix in cloud competes against hpe Onesphere and VMware Cloud Foundations and Azurestack. Pretty much all the large IT vendors will have a version of a multi-cloud ent mgmt solution. This will be crowded but NTNX sales force is aggressive and has smaller portfolio to sell than the others, and they can cross-sell off their hci install base.

Pivotal is a bit tougher for me to define but i see it competing against redhat openshift and likely against offerings from the IaaS clouds themselves. Clients may choose not to get locked in by IaaS version and prefer neutral like Pivotal.

I only see a scenario where tech/cloud/saas gets hit in a rotation by larger market forces/funds into a different industry like financials or bonds, but in that scenario many of saul/npi stocks are hit, and not just ntnx and pvtl.

In general i dont see the broader market of funds and institutions treating pvtl/ntnx different than twlo or okta or ZS as an example.

My 2 cents, which may not be worth much. :slight_smile:

Dreamer

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I would think that a recession might affect future growth of PVTL more than future growth of NTNX (but their sources of recurring revenue (i.e. past completed projects) would be relatively unaffected).

The other issue not mentioned is that a large portion of PVTL’s customers are from cross selling VMWare…the main competitor to NTNX…albeit, PVTL also works with NTNX as well.

But is a weird way, you are hoping for PVTL to shine…which may be a sign that NTNX isn’t :slight_smile:

I have the same problem…hopefully the narrative from NTNX is correct that they are a duopoly with VMware so there won’t need to be a winner take all in their market place regardless.

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Hello Dreamer,

Your competition theory is intriguing.

Pivotal is a bit tougher for me to define but i see it competing against redhat openshift and likely against offerings from the IaaS clouds themselves. Clients may choose not to get locked in by IaaS version and prefer neutral like Pivotal.

Re: Pivotal, I believe that VMWare will be the largest competitor over time. If you were Dell with their ownership of each, wouldn’t you want to pick up 2nd place in such a large market? I would be very surprised if VMWare did not come out with a competitive product soon. This will have just enough variation to appeal to that part of the market where PVTL may lose to someone else. There will be crossover, so some revenues will end up not in the PVTL pot. I believe the market is large enough that there can be more than one winner here. If I am Dell, I want as big a slice of the pie as possible.

Best regards,

Mike

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Chris, I have to disagree with your reasoning–mildly, as I’m not a techie by any stretch. But I own NTNX and PVTL in the opposite relative sizes (NTNX, 7.3%, PVTL 9.8%. I would be happy to add to my PVTL shares on any dip.

My reasoning is from a very long distance view, so consider that view to come from a non-techie, complete outsider just thinking aloud.

So many are/were worried about PVTL’s low-count customer base, even though some of the customers appear to be huge. The company just IPO’d, they’re wisely concentrating on doing whatever they do right the first time. Sometimes this causes an opportunity cost (missing out on potential new customers while hand-feeding their current ‘first-wave’ customers.)

But rather than opportunity costs rising, I see PVTL’s reputation blasting off on a path to fame and fortune. It’s not impossible that that ‘lost opportunity’ has become a catalyst for many potential customers to feel left out of the launch party and wanting a piece of PVTL’s expertise, while being impressed with their concentration on solutions for current customers and their ultimate satisfaction.

If NTNX & PVTL’s business paths are really intertwined in a parallel path as tightly as you suggest, then I believe PVTL has a heck of a lot of potential customers who haven’t even been contacted yet. Reading between the lines (I have no secret source for further data) I am comfortable assuming that the numerous glaring reviews for PVTL’s services are a) accurate, b) free of hyperbolic glad-handing and most importantly, c) understated.

As far as Dell is concerned, yes, they are a force to be reckoned with within their circle of competence. However, unless their team is full of millennials and millennial thinking–a possibility, I realize–then they would have to become very familiar with concepts like open source, public benefit, profit as secondary, brand neutral, and other philosophies, and very quickly, in order to have any chance of catching up with PVTL in the next 5 years.

Maybe I’m price-anchoring too. I bought NTNX in March and it’s finally out of the red. I bought PVTL at the tail end of May and it has already returned gains worth world cruises for the entire Family Raptor.

If I’m later proved wrong, I still won’t be ‘wrong’ and I’ll be content; after all, I own both. But if I could only own one of the two, right now I’d go with PVTL.

As an old fart, I’ve had to be convinced of the viability of the philosophies surrounding all the non-specific branding, open-source, vendor neutral, etc., business plans. But Google showed me the light and the last I saw, they were still doing okay, as are many followers with similar philosophies. Since I don’t follow Dell and VMWare, I’m not sure that they understand the power inherent in these traits. I also don’t think the traits can be instituted into a corporation overnight.

We could call Cisco and ask them if it’s possible …

:slight_smile:

Dan

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Surely you realize that PVTl is DELL?

Same goes for VMWare…not gonna produce a completing product against itself.

Both are part of the DELL family.

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Surely you realize that PVTl is DELL?

Same goes for VMWare…not gonna produce a completing product against itself.

to play devil’s advocate, Dell might want to put everything into PVTL, drive it up to a nice valuation, exit your PVTL stake, if you think you can then put that knowledge and competence into a competing product that you fully own and steal market share back.

Not saying that is Dell’s plan, but it would be a very profitable scenario if (big if) they were able to pull it off

-mekong

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Dell might want to put everything into PVTL, drive it up to a nice valuation, exit your PVTL stake, if you think you can then put that knowledge and competence into a competing product that you fully own and steal market share back.

Mekong:

That is quite a fight of fancy…not gonna happen.

PVTL is DELL…DELL will not hurt itself unless it has some type of Munchausen by proxy psychopathology.

Again, PVTL is DELL…just look at what/who controls its shares and votes.

There must be more enlightening things to discuss that this??

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dumaflotchie

You’re probably a lot more familiar with the industry than I am. I just know that, in general, companies spin off divisions via IPO with the intention of monetizing at some point in the future.

Do you expect that DELL would still own the same 70% of PVTL three years from now if PVTL tripled or quadrupled in market/stock price? I would assume DELL would sell off a good chunk of their ownership, if not all, in that scenario, but I could be wrong.

Obviously a triple or quadruple over three years would be outstanding returns for us as shareholders and none of us would complain. But it’s just a possible scenario where I could see DELL being incentivized to create a competing service in another entity they own, that’s all I’m saying.

-mekong

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If a customer ran into financial trouble and had to slash budgets, which would get slashed first [NTNX or PVTL]?

Neither, staff would take a hit, not s/w.

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