Nutanix stock crumbles on income mother, lower guidance

Shares in the data storage company Nutanix Inc. were in free fall today after missing out on expectations of revenue and issuing guidance for the next quarter, which was somewhat of Wall Street's forecasts.

The company, which sells hyperconverged information technology infrastructure that integrates computing, storage and network components, reported a loss in the third quarter before certain costs such as equity compensation of 56 cents per share on revenue of $ 287.6 million, down from the 289.4 million dollars in revenue reported a year ago. [19659002] Wall Street had expected the company to report a loss of 60 cents per share on revenue of $ 297 million.

Nutanix executives were quickly able to blame the revenue layer for the company's ongoing transition to a subscription licensing model, which they said was complicated by the need to retrain sales staff. But things could have been worse, as these efforts are developing faster than expected, officials said.

"Our transition to subscription is at the forefront," said Dheeraj Pandey, CEO of Nutanix, in a conference call. [1[ads1]9659002] It may be so, but Nutanix warned that things are likely to get worse before an improvement in the bottom line comes. The company said it expects a loss of 65 cents per share on revenue of $ 280 million to $ 310 million in the fourth quarter.

It was enough to call the alarm bells, as Wall Street had expected a much lower loss of 49 cents per share on sales of $ 332.9 million. Investors spread like rats, while Nutanix's stock fell almost 18% in retrospect.

However, Nutanix officials, who most likely expect the negative response from the shareholders, attempted to shine positively on the company's situation. For example, they pointed out that about 65% of the company's invoicing in the third quarter came from subscriptions. The result was that Nutanix's subscription revenue increased by $ 168 million, an increase of 110% from the previous year.

Duston Williams, CFO of Nutanix, said in the conversation that the company expects several long-term benefits from the transition to a subscription model. These include a more predictable revenue stream, lower marketing costs, and the ability for customers to pay for technology over a long period of time.

Nevertheless, he noted that any transition of this kind also causes friction. For example, the duration of Nutanix products sold through subscriptions is only four years, compared to five years for products sold through traditional sales models. In addition, product and support sales subscription revenues are deferred, leading to a decline in revenue, Williams says.

Another problem for Nutanix is ​​that it needs time to retrain sales staff, distributors, channel partners, and customers on their new business model, he added.

One problem Nutanix failed to mention is the increased competition it faces in its core-converged infrastructure market, Charles King, an analyst with Pund-IT Inc., told SiliconANGLE.

"The company's key problem is that the hyperconverged markets where it was an early innovator are crowded with larger competitors who are often also Nutanix partners," King says.

The bigger competitors have an advantage over Nutanix, King said. They have much deeper relationships with both existing and potential customers, but in contrast, the smaller Nutanix is ​​just one of the "more flavors of hyperconverged tech" that its partners can offer their customers.

"Nutanix will be better served by partners like are willing to evangelize their solutions, but this outcome seems increasingly unlikely, "Sa King." Looking for other outlets and opportunities is a wise course for Nutanix to pursue, but it is not clear to me which direction or how long the company must influence these changes. "

The King was not the only one who raised concerns about the growing competition Nutanix is ​​facing. Earlier this week Morgan Stanley-a reduced Katy Huberty's analyst target for Nutanix due to the pressure it faces from major rivals such as Dell Technologies Inc. and a general downturn in the broader storage market. This led to Nutanix's stock falling 10% before today's losses.

Nutanix announced a new global partnership with Hewlett Packard Enterprise Co. host the Nutanix Enterprise Cloud software on HPE's server technology. Pandey recently stopped TheCUBE, SiliconANGLE's video studio, to discuss the possibilities of that partnership:

Photo: SiliconANGLE

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