Cloudera: Following in Hortonworks’ Footsteps?
Silicon Valley-based company Cloudera (NYSE Pending: CLDR) is one of several companies making money out of processing great amounts of data for other companies. Cloudera, established as a pay by deliveryndata center for other firms, uses Yahoo-developed Hadoop open-source data analytics software to process disparate data. The firm operates much like its biggest competitor in that market, Hortonworks Inc.
Hortonworks (NASDAQ: HDP ) put itself on the public market three years ago, successfully selling its shares at $16 apiece and becoming one of the first software companies to hit the $100 million valuation twelve months into the business. Months after the IPO Hortonworks held capital market shares at $1 billion and threatened to put its competitors out of business. In the same vein, Cloudera credited a $4.1 billion private valuation from its majority shareholder the Intel Corporation (NYSE: INTC) in 2014, selling 22% of its common stock then.
Hortonworks shares now go for $10.67 per share, having lost value considerably over the past few years. It ergo seems like Cloudera is following in the tech giant’s footsteps, having announced on Monday that it will hold its debut. Cloudera will be selling its stock at $12 to $14 a share, a substantial drop from its previous $30.92 offering. Best case scenario for the Cloudera IPO will yield about $242 million, pegging the company’s current valuation at about $1.79billion. However, Cloudera still has an option to raise up to $2.4 billion from grants and other private options. Other shareholders in Cloudera include Accell Group (NYSE: ACCEL) and Greylock Partners. The two firms have stake holdings of 16.3% and 12.5% in Cloudera Cloudera stated in its prospectus that Intel intended to purchase at least 10% of the 17.31 million shares that will be on offer during the IPO. Intel is the majority shareholder of Cloudera pre-IPO. According to analysts, this move by Intel is to prevent its shares and controlling interest from being diluted.
After the first few good years, Hortonworks’ share started tanking. Hortonworks blamed the poor performance on stiff competition from companies like HP and IBM. Another reason for this is that Hortonworks’ services was no longer unique. Consolidation of public clouds like Google with Hadoop technology made Hortonworks obsolete. Cloudera, with its massive spending base and the equally competitive market, seems to be suffering the same fate.
Hortonworks downward spiral was marked by staggering losses and weak stock competitiveness. Cloudera, on the other hand, experienced a boost in revenue from 2015 to 2016 financial years, which rose from 166 million to 261 million in the latter year. The company’s large capital expenditure cut company funds down to a net loss of roughly $187 million, down from the previous year’s $203 million. Though the trend suggests decreasing losses, Cloudera risks further losses that will see its stock price lower further much like Hortonworks’ at one point.
As Caldera prepares for its first issuance, the parallels between it and Hortonworks seem more noticeable than ever. The two companies have a lot in common. Investors can’t help but wonder will Cloudera take a nosedive after its IPOlike Hortonworks, or will it do better? However, following Hortonworks’ footsteps may not altogether be a bad thing for Cloudera. After all, didn’t Hortonworks just clinch contract deal with the Indian government on Monday?