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Cloudera Inc (NYSE:CLDR) Continues to Warrant Caution

Cloudera Inc (NYSE:CLDR) shares continue to fall following the company’s merger with its supposed rival, Hortonworks (HDP). The two companies represent the most recent incarnation of the Silicon Valley ideal as far as a combination of hot buzzwords and complicated execution. They also represent thematic investment vehicles designed to capitalize on the height of a stealth investment bubble in their home buzzwords of big data and cloud services.

And their merger capped a high, which demonstrates something about how markets work: you have two of the most exciting 21st century buzzword-laden names combining to great fanfare among the tech stock growth crowd – that’s a context guaranteed to suck in a whole heeping load of weak-handed speculative investment capital. And the result has been a flaring fireworks show of a top in the two stocks, followed by a dramatic dump.

Cloudera Inc (NYSE:CLDR), as noted, promulgates itself as a company that provides platform for machine learning and analytics in the United States, Europe, and Asia.

The company operates through two segments, Subscription and Services. Its platform delivers an integrated suite of capabilities for data management, machine learning, and analytics to customers for transforming their businesses.

The company provides Cloudera Enterprise Data Hub that allows companies to execute various analytic functions against a shared set of governed and secures data in public and private clouds, and data centers; Cloudera Data Science and Engineering enables users to streamline, simplify, and scale big data processing; Cloudera Operational DB that enables stream processing and real-time analytics on continuously changing data; Cloudera Analytic DB optimizes enterprise data warehouses; and Cloudera Essentials.

It also offers Cloudera Altus, a platform-as-a-service offering; Cloudera Data Science Workbench that enables self-service data science for the enterprise; Cloudera Fast Forward Labs, which delivers applied research in machine learning and artificial intelligence to its customers; and Cloudera SDX, a modular software framework that enables its customers to have a shared data experience. In addition, the company provides technical support, professional, and training services.

It serves corporate enterprises and public sector organizations primarily through its direct sales force. The company has a strategic partnership with Intel Corporation.

 

Two Great Tastes

As noted above, CLDR recently exploded higher on news of its merger with HDP. What we see on the charts is another lesson in how markets work.

The cloud theme and the big data theme both represent the heights of investor marketing over the past few years. They are buzzwords with major legs during that period.

For both of these companies, the path to their current glory came through the typical Silicon Valley process of genetically engineered birth and Sand Hill Road anointing. The big Palo Alto players were heavily involved in both, and for good reason: because they couldn’t lose. Even if the companies wouldn’t make much money down the road, the themes involved would be oh-so-easy to market to other investors.

These stocks were engineered to be bullet-proof vehicles for greater-fool investing.

Certainly, both have talent and value. We are not arguing they lack either. Both are growing (HDP moreso than CLDR).

But, once you think in terms of their marketability as investment vehicles, and the fact that the merger value for each was actually less in market cap terms than their pre-IPO values, the veil drops and the sense of hype becomes a bit more obvious.

Cloudera Inc (NYSE:CLDR) managed to rope in revenues totaling $110.3M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 22.8%, as compared to year-ago data in comparable terms.

In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($378.4M against $301.5M).

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