Nutanix Finally Offers IPO, Sees Success As Stock Spikes

After several false starts, hyper-converged infrastructure developer Nutanix on Friday finally completed its IPO.

And, in a time when tech IPOs have not been doing well, Nutanix's IPO stands out for a surprising opening day success.

Nutanix, which by many accounts is the leading hyper-converged infrastructure vendor, late Thursday priced its IPO at $16 per share, which was a considerable jump from the $11.00 to $13.00 a share it had been expected to offer when it filed its fifth amendment to its S-1 last week with the U.S. Securities and Exchange Commission.

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Investors like what they saw in Nutanix, which trades on the NASDAQ exchange under the ticker symbol NTNX. The company's share prices opened Friday at $26.50 per share and closed at $37.00. Prices held at that level in after-hours trading.

Based on last week's filing, Nutanix had been expected to bring in about $209 million. But with the higher price, the company on Friday raised about $238 million.

Jeff Guenthner, director for solutions architecture at CMI, a Mill Valley, Calif.-based solution provider and Nutanix channel partner, told CRN via email that Nutanix has been an incredible partner for his company, and that he expects Nutanix to continue to grow as it disrupts the IT market.

"They are just getting started. We also believe that the IPO clears the way for re-validation that the market space for HCI [hyper-converged infrastructure] is here to stay and will only mature. Expect some market consolidation in the next 24 months as the old-world technology companies look to reposition their offerings while enhancing them through M&A. Case in point: Dell-EMC," Guenthner wrote.

Nutanix noted in last week's S-1 that Dell, which is also an OEM partner for Nutanix, could - through its acquisition of EMC - become an even stronger competitor given its leading server and now leading storage businesses.

Dell, with the EMC acquisition, gains control of VMware's VxRail and VxRack hyper-converged infrastructure technologies that compete with Nutanix.

It's expected Dell will want to combine the VxRail and VxRack software with its server hardware. Just what that might mean for the Dell-Nutanix relationship remains to be seen.

Dell was not able to comment on this question by press time.

Nutanix executives were not available on Friday to discuss the IPO. However, Nutanix CEO Dheeraj Pandey said in a prepared statement emailed to CRN that Nutanix has for seven years been raising the bar for enterprise infrastructure by rethinking storage and compute for a virtualized world.

"Today’s listing marks an important milestone on our journey as we continue to revolutionize the next generation IT infrastructure and computing that will help our customers realize the full potential of the Enterprise Cloud," Pandey said in that statement.

In last week's S-1 filing, Nutanix said that as of July 31 it had 3,768 end-user customers of its hyper-converged infrastructure system, including 310 global 2000 enterprises such as Activision Blizzard, Best Buy, Jabil Circuit, Kellogg, Nintendo, Nordstrom, Toyota Motor of North America, and the U.S. Department of Defense Office of the Secretary of Defense.

The company is still on an upward growth curve. Revenue for Nutanix's fiscal year 2016, which ended July 31, reached $444.9 million, up from $241.4 million in fiscal 2015 and $127.1 million in fiscal 2014.

The company posted a loss of $168.5 million in fiscal 2016, however, up from $126.1 million in fiscal 2015 and $84.0 million in Fiscal 2014. As of July 31, the company realized an accumulated deficit of $441.9 million.

In its S-1 analysis of the competitive environment, Nutanix wrote that it operates in an "intensely competitive enterprise infrastructure market and competes primarily with companies that build and operate enterprise clouds, integrated systems, and standalone storage and servers."

Among its competitors are software providers like VMware and Red Hat; traditional IT systems vendors including Hewlett Packard Enterprise, Cisco Systems, Lenovo Group, Dell Technologies, Hitachi Data Systems and IBM; and storage vendors such as Dell, NetApp, and Hitachi Data Systems.

Nutanix also mentioned that it relies to a "significant degree" on indirect sales channels for revenue. In the S-1, the company listed two distributors - Carahsoft Technology and Promark Technology - for a total of 38 percent of its revenue. Promark Technology was acquired by Irvine, Calif.-based distributor Ingram Micro in 2012.