Cloudera Inc (NYSE:CLDR) is a stock we have been generally skeptical on for most of the past two months. We wrote about it with a bearish view in late October, noting that it represented “the most recent incarnation of the Silicon Valley ideal as far as a combination of hot buzzwords and complicated execution” and was an “SI/VC exit play du jour”. The gist of that idea is something highly unpalatable for those starry-eyed about this one, but the fact remains that you have to think about who is selling it to you and how.
In this case, the sellers are Accel Partners, Greylock Partners, Meritech, and a host of other Palo Alto players. They got in when the market cap was 1/100th of what it is now, and they nursed it along on the Secondary Market until it had gone through its big flower-blossom of growth, and then they got on the phone with Morgan Stanley, J.P. Morgan, Allen & Company LLC, BofA Merrill Lynch, Citigroup, Deutsche Bank Securities, Stifel, JMP Securities, and Raymond James and said, “Analytics, Big Data, Cloud Computing, Cloud Data Services, Cloud Infrastructure, Cloud Management, Enterprise Software, Machine Learning, Open Source.”
Cloudera Inc (NYSE:CLDR), as noted above, has been correcting sharply. The writing was on the wall with the one-week-out reaction to the merger with Hortonworks (HDP). Those stocks should not have cratered in response unless there was something stinking under the surface.
To see the story blow up to this extent is a little surprising because we still believe there is something real to this story.
But we wanted to circle back around and point out the other perspective: Those guys at Accel are really, really smart. The story CLDR investors are buying is the story they wrote, packaged, and sold to Wall Street.
They did not do that for charity. They did it because that’s the business they are in. “Analytics, Big Data, Cloud Computing, Cloud Data Services, Cloud Infrastructure, Cloud Management, Enterprise Software, Machine Learning, Open Source” – that’s the list of terms CLDR used to describe itself on Crunchbase as private name. That is a very, very strong potion in the investment world of 2018.
At this point, we are going to hit bottom as the weak hands are fully dismissed. At present levels, the stock is trading much cheaper than most of the more egregious pricing errors of the now-collapsing cloud bubble.
And news that the U.S. Federal Trade Commission granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust act is all to the good. The main process right now is about ridding the tape of the weaker-handed investment money that has been holding on since the IPO or the merger announcement.
Upside Down
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.
Cloudera Inc (NYSE:CLDR) pulled in sales of $110.3M in its last reported quarterly financials, representing top line growth of 22.8%. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($378.4M against $301.5M).