Pivotal, I hardly knew ye!
I know, pretty crazy that I bought after the earnings report a week ago and then sold today. Nothing was wrong with the report. Nothing was wrong with anything the company has done. My questions are all related to the future. Namely, the TAM and Pivotal’s customers.
Short version: They have several very large customers whose spending with them has ramped up FAST. It’s very hard to imagine spending will keep this pace, so if they can’t add new customers who will also become very large, growth rate will drop precipitously.
Brittlerock picked up on this issue here: http://discussion.fool.com/fish-you-appear-to-be-sanguine-about-…
I had addressed a similar concern - that their incredible retention rate but uninspiring new customer growth might set them up for a rapid slow down at some point:
SteppenWulf mentioned that his experience was working at the largest banks in the world. I can see how they would need Pivotal. In fact I think his bank might be one of Pivotal’s largest customers, maybe even #1. Pivotal has just 339 customers. Will the others ever spend as much with Pivotal as said top 5 bank? I doubt it. Please understand, I am not writing this post to criticize SteppenWulf, Saul, or any of the others who have analyzed this company and lent their knowledge and experience to the board. They may be right and I may be wrong.
Tinker mentioned Kubernetes who partners with RedHat Openshift and provides a similar product. It seems like many other large banks use them: Goldman, Barclays, SoftBank, KeyBank…along with other large enterprises like Cisco, T Mobile, Ebay, JD.com, Comcast, Phillips, etc.
So perhaps what Pivotal and Kubernetes do is much bigger than I understand, and perhaps Pivotal will get a bigger piece than I can imagine…or perhaps Kubernetes is a dangerous competitor that already has a lot of Pivotal’s potential clients locked up. I don’t know and I really don’t need to know. I’m placing Pivotal in the “too difficult” category (a man’s gotta know his limitations).
Plus, they’re now a 7 billion dollar company after the huge share price increase this month (shares are up 56% in June!), and I just can’t see the way forward in the near term.
I’m mainly posting this to add my thoughts (non-expert thoughts) to the discussion. Hope someone convinces me to get back in.