Cloudera (NYSE:CLDR) and Hortonworks (NASDAQ:HDP) have been competing to attract business onto their new technologies for quite some time, but they have now combined forces in a merger to take on Amazon (NASDAQ:AMZN).
The merger of equals all-stock deal brings together two leading Hadoop open-source software vendors in a 5.2 billion deal. Although in October when the announcement of the deal happened its value was $5.2 billion it has nonetheless dropped to less than $3 billion by the official close of the deal.
Structure of the merger
Going forward the new company will be operating and trading as Cloudera (NYSE:CLDR) with 60% of its shares remaining with Cloudera’s investors. However, investors are cynical, and they are unsure whether the deal will change fortunes.
Tom Reilly, the CEO of Cloudera, will be leading the company business while Rob Bearden the CEO of Hortonworks has been integrated into the board of directors. The companies will continue to offer their Hadoop open-source software that is used by customers to store, process as well as analyze various data type.
Market outlook
Hortonworks started to trade publicly in 2014 with Cloudera making an entrance in 2017 with their initial price offering being $15. The stock price latest closing had low $10.39 with a daily high of $11.07 with an average share volume of4.1 million. The stock movement with the latest closing at $11.01 shows an increase of +6.17%.
Cloudera has a market capitalisation of $2.90 billion and the past year they had a 52-week range of a $10.07 low and a high of $22.42.
Source: Stockcharts.com
Amid the market sell-off, in the fourth quarter, the stocks leaped which raised concern on whether the merged company has what it takes to take on a giant like Amazon Web Services.
For the past year, many cloud stocks have experienced a boon, but that was not the case for Hortonworks who saw a 29% drop and Cloudera whose shares fell by 33%.
The new company is expected to earn them a revenue of approximately $720 million from over 2,500 customers, and they expect their income to exceed $1 billion by 2020
Taking on Amazon
Cloudera CEO has indicated that the merger is preparing to tackle Amazon and their cloud services because it is their biggest competitor as a resulting their house offerings.
Mr. Reilly claims that the new company will transform Cloudera as a market leader because of the joint team and technology portfolio that will continue to drive their innovation and growth. The company aims at providing their customers with exclusive cloud solutions that bring the right analytic data from the edge to artificial intelligence in the industry’s pioneer Enterprise Data Cloud.
The company is keeping close tabs on Amazon Web Services because of their extensive work in cloud infrastructure that pulls companies’ workloads into data centers through additional functionality which makes it easier to access data once it is in their machines.
However, Cloudera may be at risk in trying to match Amazon which has already made massive investments in databases with competitive products such as Elastic MapReduce that can store and process various types of data.
Will Cloudera manage to match Amazon?
Cloudera in it is way has strengths that they can exploit as they take on Amazon especially their Hadoop software which is independent with a clear open-source channel.
Similarly, since they run their software through corporate data centers as well as in multiple clouds, they will be able to leverage the market since AWS exclusively focuses on delivering their software from remote centers.
Equally, they have an advantage over Amazon because Amazon Web Services doesn’t have a way of permitting users to access their software products on Microsoft and Google operated clouds.
The biggest gain for Cloudera is that they don’t have to worry of Hortonworks as merger will make them more efficient in R&D and sales, and within a year they expect to have a cash flow operating margin of 15% which will show their profitability.