initial public offerings (IPOs) trading on American exchanges

Friday, December 13, 2013

Nimble Storage (NMBL) began trading on the NYSE on 13 December 2013

Shares of Nimble Storage (NMBL) ended the day up $12.93, or 62%, at $33.93, after raising $168 million in an IPO whose price, $21, was above an expected range of $18 to $20, after filing back in late October.

The offering, underwritten by Goldman Sachs, Morgan Stanley, Pacific Crest Securities, William Blair, Stifel Nicolaus, Oppenheimer & Co., and Needham & Co., is also a coup for the Exchange as it adds to it’s growing roster of tech deals stolen away from Nasdaq.

At Nimble’s headquarters in San Jose, founder Varun Mehta expressed the view Nimble can be “the next great storage company” because the “incumbents” — EMC (EMC) and NetApp (NTAP) — “can’t move fast enough” to catch up with trends in storage such as the proliferation of flash solid-state drives.

“There’s this recognition that suddenly this staid business with big encumbents has been turned on his head,” said Mehta.

Mehta cited one financial firm that has 30,000 seats of Microsoft Exchange in its data centers around the world and spends $10 million a year on storage equipment. “They invited us to demo with them, and what they found is that a half a rack of Nimble with 100 disks, and some flash alongside it, can replace the incumbent’s offering that would have taken 600 disks,” he told me.

“We were selling a lot less hardware, and it was just the magic of our software,” thus helping to reduce the up-front cost of the gear.

The company argues that its software and service capabilities, on top of the inherent advantages of flash, will further reduce operating expense, as well, which is, after all, the large component of companies’ total cost to build their data centers over time.

Nimble Storage CEO Suresh Vasudevan celebrates their IPO at the New York Stock Exchange on December 12, 2013 in New York City

Being the next great storage company is a tall order, to be sure, given there really hasn't been a next great storage company outside those two in the last two decades, with promising startups such as 3Par getting bought out.

Plus the fact that Nimble is one of dozens of storage startups with similar dreams. Violin Memory (VMEM), which went public in September and plunged on its first day of trading. The stock plunged another 44% last month the day after it missed its first public quarterly report, and there have been rumors of a shake-up in management. Then there’s Fusion-io (FIO) ex-founder David Flynn, and his next big thing, stealth operation Primary Data.

Another startup, Coho Data of Sunnyvale, California, staffed with ex-Citrix Systems (CTXS) talent, argues Nimble is just replicating the current unworkable storage situation. CEO Ramana Jonnala told me in October when I met with him, islands of storage. “When you buy a Nimble array [of disks and flash] you end up with the same problem,” says Jonnala. “You can’t easily upgrade an array,” he argues, to “scale out” one’s storage capacity.

But the business is real, with revenue of $84 million in the nine months ended in October, up 150% from the prior year. (Nimble is not yet profitable, having lost almost $30 million in that time.)

In my conversations with Wall Street types this year, they seem well disposed toward Nimble, counting it as one of the “real” companies, with a product portfolio that’s actually got traction, in a hot market filled with hyperbole.

As ISI Group‘s Brian Marshall, who has met multiple times with the company, wrote in a note to his clients on Tuesday, “We have met with management many times and in our view, Nimble is a terrific company with a great management team and innovative product offering which uniquely combines the key attributes of flash storage (i.e., performance) with that of HDDs (i.e., capacity, low-cost).”

No comments:

Post a Comment