Nutanix CEO stays cagey on role in rebooting tech IPOs

Dheeraj Pandey, CEO of Nutanix, may be the man who restarts technology IPOs after a rare recent hiatus

When fast-growth datacentre company Nutanix filed an amended S-1 prospectus recently, technology market watchers hoped this was the starting gun for a new round of technology IPOs after a notably quiet first calendar quarter that saw not a single technology company make a debut in the US.

I spoke to Nutanix CEO Dheeraj Pandey yesterday about his intentions and he told me that he is confident that the markets are coming around to buying into the company’s growth story after a pause in calculating chunky valuations for fast-rising companies yet to turn profits.

We’re negotiating with the market and it’s not they don’t like the product, it’s just at what price,” Pandey told me. “People will bounce back to what growth means.”

Yes, but in what time frame? Pandey hinted that the change in attitude could come back within a couple of months.

“We just want the public markets to become growth-friendly and we’re selling an NTNX stock ticker that’s all about growth.”

We’ve seen some sharp declines in the valuations of datacentre companies like Pure Storage and Nimble Storage recently but Pandey noted that that pair illustrate how the markets still reward companies with large-scale ambition.

“Pure is still five times bigger than Nimble in market capitalisation and markets still have respect for companies that make big bets,” he said. “With high bets come high rewards. Nimble probably tried to hedge its bets and build a cheaper, faster NetApp.”

Nutanix’s growth trajectory, up over 80 per cent year on year, has seen it soar past $100m in revenue for its last quarter as more IT buyers see value in converged systems that blur the lines between previously separate activities such as processing, networking, storage, backup and virtualisation.

Pandey declined to say how big his company could become but said there were no about turns planned:

“Things have not changed at all. If anything the conviction of building a long-haul enterprise computing company only gets stronger. There’s a lot to be done here ... it’s going to be a pretty long marathon.”

The big datacentre networking storage firms (HP and VCE, for example) seem to have moved to a position of embracing Nutanix’s hyperconvergence ethos while in VCE’s case saying that they see it as a tactical approach more appropriate for branch offices than the enterprise datacentre. Is that just politicking? Pandey takes a philosophical approach.

“It’s just like what they said to Amazon four or five years ago or Wintel in the 1990s or [more recently] Apple in the enterprise. Competition will always play it down. I go back to Mahatma Gandhi: he talked about first they deny you, then they ridicule you, then they fight you and then you win. Large companies are in denial. VCE says ‘we are creating this swim lane’. People used to laugh at us and say ‘this is a science project’ and now they say ‘we have one’.”

The last time we spoke, Pandey said he was optimistic that the relationship with Dell that sees the computer giant license Nutanix software to sell on its servers and appliances, would continue despite Dell buying EMC. Nutanix’s S-1 filing lists a rupture of the Dell relationship as a risk but he says he remains confident Dell will stay with Nutanix so long as his products and service hit the mark.

He won’t give an indication of how much Dell contributes to Nutanix revenues but suggests if Nutanix was so dependent on Dell, its margins would be much higher, as margins tend to be for pure software companies.

“We’ve done a pretty conservative job [listing possible future challenges on the S-1] which is the right thing to do. If there’s a potential risk you have to write it down. How far this relationship will last [remains to be seen] but we’ve come a long way with a lot of naysaying [in the past] and figured out ways to work around [negative perceptions].”

Pandey fights shy of providing a detailed update of Nutanix’s relationship with Lenovo that followed hard on the heels of the Dell-EMC news but praises the know-how of the Chinese company.

“It’s very early days and we’d rather under-promise and over-deliver just as we did with Dell. But [Lenovo] definitely has an extremely passionate sales force. They come from IBM heritage and they really understand the datacentre so they do a lot of value selling and solution selling.”


Related reading:

Pure Storage CEO plays long game despite stock wobble

Coupa, Okta, Nutanix test 2016 IPO waters

Choppy waters await 2016’s pre-IPO voyagers

Nutanix and Lenovo link arms