☁️ Pour One out for Cloudera ($CLDR)
5-Minutes Daily. Built for VCs, founders, and SaaS executives.
[Week 22, 2021] Cloud stocks (-0.5%) underperformed the broader market (+0.6%) for the shortened week ending June 4, 2021 as investors digested a range of mixed SaaS earnings, money flowed out of higher-risk equities ($IPO -0.6%), and S&P performance was primarily driven by strong performance from the Energy sector.
Lead, Follow, or Get Acquired by Private Equity
Cloudera going Private in $5.3B Private Equity Deal
Public markets are no place for a cloud company to "find itself". After starting as a side project within Yahoo and officially launching (to significant excitement) in 2008, the company has struggled to find its niche. $CLDR timeline:
$CLDR IPO'd at ~$15/share in 2017
Investor excitment drove the stock to open at nearly $18/share
The company is now being acquired for $16/share
Cloudera was an early 'big data' company, commercializing open-source Hadoop technology, and looked poised for success as companies required a platform to analyze and utilize the vast and every growing volume of data they were producing.
But as technology tends to do - it didn't live up to the hype. Cloudera merged with is closest competitor, Hortonworks, in early 2019 and by August of the same year activist investor Cark Icahn had 2 board seats.
“The excitement around the original promise of the Hadoop market has contracted significantly. It’s incredibly expensive and complex to get it working effectively in an enterprise context,” Casey Aylward, an investor at Costanoa Ventures via TechCrunch.
So what are the benefits of going private? The investments required to accelerate the company's shift (and not to mention the likely earnings volatility) to the cloud would likely spook public investors who were already unimpressed with years of decelerating growth.
Cloudera already got a head start announcing the acquisitions of two SaaS Companies: Datacoral and Cazena. The acquisitions are likely aimed at helping the company's technology become more user-friendly and help capture additional economics on the analytics/AI/ML layer on top of the data lake.
“Both the acquisitions are geared towards making the management of cloud infrastructure easier for end-users. Our research shows that data prep and integration takes 70%-80% of an analyst’s time versus the time spent in actual analysis. It seems like both these companies’ products will provide technology to improve the data integration/preparation experience," Chandana Gopal, research director for the future of intelligence at IDC via TechCrunch
Other good reads: TechCrunch, CNBC, SiliconANGLE, TheCUBE
a16z: Expensive Cloud Spending Locking $100B of SaaS Market Cap
"You’re crazy if you don’t start in the cloud; you’re crazy if you stay on it."
The a16z Growth team estimates repatriating cloud loads could unlock $100B of market cap based on applying current trading multples to the estimated savings the top 50 public SaaS companies could generate by repatriating cloud loads to managed servers.
What they miss: fast-growing SaaS companies like $SNOW, $FSLY, $DDOG, etc. have greater downside risk by diverting resources and potentially slowing growth than upside from GP% improvement. Check my thread out here:
1/ .@a16z: Should SaaS companies 'repatriate' their cloud workloads?
1) Public SaaS spend: ~$8bn
2) Repatriating saves ~50%
3) SaaS companies trade @ 24-25x GP
= $100bn of trapped market cap
Lets dive in! 👇👇— Breaking SaaS (@BreakingSaaS) May 31, 2021
@ZackKanter had a friendly reminder that building software is hard and you should probably just stay in your lane:
This thread can be summarized as: any technology strategy requiring significant effort, whose alleged primary benefit is a strictly measurable decrease in cost, is wrong. pic.twitter.com/XsarK13uBz— Zack Kanter (@zackkanter) May 30, 2021
📅 2020: Officially the year #Cloud Service Revenues > Enterprise Data Center Spending
Enterprise Cloud spending grew 35% Y/Y in 2020 to $130Bn
1/ 📅 2020: Officially the year #Cloud Service Revenues > Enterprise Data Center Spending
Any doubt that software is NOT eating the world?
🖐️ facts and thoughts about the crazy growth in cloud from @SRG_Research 👇👇#SaaS— Breaking SaaS (@BreakingSaaS) June 6, 2021
With blessings of strong NRR,Thomas