When we analyzed financial reports coming out of hyper-converged platform maker Nutanix 13 weeks ago, we lamented the fact that while Nutanix has defined a new market and is one of the leaders in that market, it Not able to expand. market fast enough.
To become a profitable business even after being in the area for more than a decade. And this quarter, when Nutanix reported another tough quarter, but a new partnership with Citrix Systems, a longtime maker of application and server virtualization platforms, got us thinking.
And the idea is simple enough: Should Citrix Systems and Nutanix merge and create a more integrated and integrated platform that makes both’s software more attractive to a broader set of customers? The answer would be very worthy, yes.
Not all platforms are top-down, from supercomputing centers or hyperscalers or cloud builders. VMware built a very respectable and elegant server virtualization platform before the Great Recession that was suitable and necessary for many customers who skip a generation or two of server upgrades, or at least want to do more work on those servers. which they were going to buy.
VMware’s GSX Server debuted in the middle, with a product aimed at midrange customers with modest compute farms, and ESX Server had some enterprise-grade features that evolved into the ESXi hypervisor and the vSphere management layer that provided 400,000 such enterprises to date. applies.
The company used to say 500,000 customers, like when we did a deep dive in April 2018, and beyond that, VMware reported 600,000 customers. Regardless, with fewer customers, VMware became a $11.8 billion company in fiscal 2021, down 17 percent.
Nutanix hasn’t been so lucky, with a customer base of just 20,700 and revenue of $1.46 billion in the 12 months since October. Even more worrying is the fact that the company posted a net loss of $1.19 billion over the past 12 months against that increase in revenue, a 30.8 percent increase over that time.
To be fair, most of these costs driving losses at Nutanix are due to the stock-based compensation the company pays to key employees — the total number of employees was more than 6,000 when it was disclosed last quarter, but It hasn’t happened. Updates for this quarter – to keep them motivated and engaged (we believe).
Nutanix is heading towards break even on a free cash flow basis, which is a good thing. But the actual accounting looks rough and there is no way to cover it.
For the quarter ended October, product revenue at Nutanix increased 15.6 percent to $180.1 million and support revenue increased 26.4 percent to $198.4 million; Total revenue rose 21 percent to $378.5 million, but net loss more than doubled to $419.9 million. Somehow, and thankful for a good company with a good product trying to go mainstream, Wall Street has been very patient with Nutanix and its market cap of $7.1 billion if we go to press.
Citrix Systems, after a few issues of its own, has seen its stock fall 42 percent from its recent January 2021 local high and now has a market cap of just $10.4 billion, down from $17.9 billion initially. of the year. Citrix has shrunk in terms of market cap, while Nutanix has remained more or less in the same range in recent years.
(It had quite a bit of business a few months ago.) But here’s a big difference between Citrix and Nutanix: Citrix has a diverse base of application virtualization technologies that have been rebranded in recent years, but we’re also seeing them as NetScaler, various Know as Xen-products. – XenApp, XenServer, XenDesktop – but now called Citrix ADC and Citrix Virtual Apps and Citrix Hypervisor.
There’s a lot of Cloud.com cloud management tools out there and Kaviza VDI too. The company managed to put together a platform for virtualizing applications and servers — it’s not VMware, mind you — but Citrix was certainly a contender and in the subsequent twelve months ending in October, it just also generated revenue of $3.18 billion.
And – here’s the main thing – it has over 400,000 customers around the world.
It is 20 times more than Nutanix. So a collaboration between Nutanix and Citrix is certainly there to help them, but perhaps there is a better way to merge the two and create an application management and virtualization platform that works natively and on cloud infrastructure.
Citrix was threatened by Elliott Management in 2017 to sell its GoTo suite of online applications to LogMeIn for $1.8 billion – which would have likely died during the pandemic – then Elliott Management and Francisco Partners bought it for $4.3 billion in December 2019. taken under investigation. , (It was probably a very lucky deal, given the timing, for those two private equity firms, right?)
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