Box shares close at $23.23 on its IPO day, up 66 percent

Box’s first appearance on Wall Street as a public company went off to a good start. The Los Altos company’s shares are priced at $21.79 as of 7:18 AM PST, which is up from yesterday’s set price of $14 a share. At closing time, Box’s shares ended up at $23.23, which is a 66 percent boost from the $14 share price. The company ended up raising $175 million on Friday through the IPO.

Box’s IPO is being closely watched by industry observers since the cloud storage and workplace collaboration startup first detailed its IPO plans back in March. With Box’s current share price hovering in the $20 range, it’s now valued over $2 billion, which puts it back in line with the $2.4 billion valuation the company received when it took in a $150 million funding round from TPG Capital and Coatue Management.

I’ll be following the day’s developments here in this post:

7:30 a.m. PST – Here’s a chart that gives a rundown of Box’s first minutes since going public.
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7:48 a.m. – Here’s a statement from Box CEO Aaron Levie on the IPO that we received:

[blockquote person=”Aaron Levie” attribution=”Aaron Levie”]We’re in the midst of a profound technology shift, as businesses of all sizes move their critical information and processes to the cloud. It’s an incredible time to be building an enterprise software company, and we couldn’t be more excited about Box’s future. [/blockquote]

Here’s Apple’s Tim Cook sending over good vibes to Box.

And if you were curious as to what type of socks Aaron Levie might be wearing on his big day, check them out here as he visited the ever-enthusiastic Jim Cramer:

8:02 a.m. – Box is now trading at about $22.67, off a high of $24.73 so far this morning, but there’s a long way to go.

8:16 a.m. – Well, perhaps Box did undervalue itself before going public, as Gigaom’s Stowe Boyd thought when we last spoke. Stowe and others speculated that Box originally set its share prices well below the $2.4 billion valuation it received in summer in order to underplay itself and “have some headroom.”

A Reuters report currently values the company “at nearly $3 billion.”

CNBC asked Levie about why the company set the price as it did and Levie replied “Our job is to try and get a fair valuation of our company in this process and I think that was the strategy we employed and let the market kind of figure out what the pricing is from there, and I think given the growth of the business I think you’ll see kind of what we’re up to.”

A look at the trading floor as Box opens

A photo posted by NYSE (@the_nyse) on

8:30 a.m. – Levie told CNBC that he thinks Box is misunderstood in that some people believe it is a consumer company and not an enterprise company. He then listed off some of the Box’s clients (of course starting with [company]General Electric[/company]) and reiterated that the company “helps manage corporate information, secure it, and then make it accessible in different devices, allow you to collaborate around it and that’s not really the focus of Google, which is much more consumer oriented.” Hmm, I bet [company]Google[/company] would disagree.

8:44 a.m.
Here’s what Levie told CNBC about Box’s burn rate and how it plans to make a profit:
[blockquote person=”Aaron Levie” attribution=”Aaron Levie”]We run the business far more conservatively from what is assumed because we’re going after such a large market. We care about the individual profitability on a per customer basis and right now we’re in the mode where we are going after this market in a big way with a product that’s very differentiated and I would just say to investors, certainly we would prefer investors that would understand that model, that understand the sort of replatforming of enterprise IT that is playing out.

When you think about the new, next generation IT model for a large organization it’s going to be services like Workday and Salesforce and ServiceNow and these platforms, and we’re trying to take the content management and the storage infrastructure from the on-premise environment and move that to the cloud. And the economics are pretty clear in the S-1 in terms of how we get to profitability in doing so.[/blockquote]

Check out Box’s numbers per its SEC filing and see if you agree with Levie:

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8:52 a.m.

9:27 a.m. – And speaking of Dropbox and what the Box IPO could mean for the long-time Box rival, Forrester’s vice president and principal analyst Rob Koplowitz shared his thoughts with me in an email:

[blockquote person=”Rob Koplowitz” attribution=”Rob Koplowitz”]I do see Dropbox and Box on a collision course if Dropbox continues to pursue the enterprise, and I have no reason to doubt that they will. People are saying they don’t compete, and it might look that way today, but in the long run they are just taking different paths to the same goal.
[/blockquote]

Also, Levie just responded to Tim Cook’s tweet. It’s warm and gushy. Investors should be pleased.

9:48 a.m.
Levie spoke to Fox Business and was asked about competition from companies like [company]Amazon[/company] and [company]Citrix[/company] and if “any of these companies keep you up at night?”

Levie replied that since the company was founded, they’ve always been in tough competition and said the following:
[blockquote person=”Aaron Levie” attribution=”Aaron Levie”]We’re talking about essentially, every bit of data in the entire world in enterprises needs to be managed; it needs to be stored, it needs to be secured, people need to access and share that information so there’s going to be a number of companies that want to help organizations do that and so we’ve always had competition in this process.[/blockquote]

Fox Business then asked about Box’s spending habits to which Levie replied:
[blockquote person=”Aaron Levie” attribution=”Aaron Levie”]It’s always a balance, right? We see a once in a lifetime transition from on-premise technology, on-premise computing, where every single year, tens of billions of dollars are spent on a legacy technology architecture and we see that, much of that, transitioning to the cloud. And there’s only going to be a few winners when that happens so we would like to obviously be one of those winners…

…As that technology all transitions to the cloud, we need to be able to help customers and be there as they are making that transition and that takes money and that takes investment and a salesforce and marketing and building out world-class technology and those are the investments that we’ve made.[/blockquote]

There’s those words again: sales and marketing. Box is entering new territory targeting potential customers in sectors that have historically been the realm of the big enterprise vendors companies like Microsoft, IBM and Citrix.

It’s likely that Box is going to be spending more on sales and marketing to compete against the big guys for these bountiful deals, and that’s going to require a team with the necessary skills and knowledge of each industry that Box is targeting — healthcare, legal, financial, etc.

10:00 a.m.

10:08 a.m.

10:31 a.m. — Box now trading at $23.72.

11:15 a.m. — So Box is clearly having a nice day with its shares performing much better than what some folks might have thought leading. However, not everyone is saying “BUY, BUY, BUY!”

Tom Taulli at IPO Playbook is weary of a publicly traded Box and he believes Box’s revenue growth is starting to stall, writing “During the quarter ended Oct. 31, revenues increased by 69% compared to a 98% ramp for the quarter ended Jan. 31.”

Like many others, he also sees intense competition from the big cloud providers and legacy companies and writes that “there are several examples of cloud operators that have been crushed by the competition.”

He then cites Millennial Media, Inc. as an example of a startup that got in over its head in the public marketplace where it had to battle Google and Apple in the mobile app space. He writes that “Since its IPO back in March 2012, Millennial Media has lost 94% of its value.”

Does Box face a similar fate?

And if you want to live vicariously through Levie on what it is like to become a public company, Marketplace Tech was there at the trading floor and captured some sounds. Honestly, I was hoping for a lot more yelling and chaos, like the running of the bulls.

11:38 a.m. — Future frenemies?

12:41 p.m. — Share price is at $23.48.

12:57 p.m.

1:35 p.m. — Final pricing:
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This post will be updated throughout the day

Report: Box sets the price of IPO at $14 per share

Box plans to offer 12,500,000 shares priced at $14.00 per share during its IPO on Friday, according to a Reuters report late Thursday citing an underwriter. CNBC and the Wall Street Journal are also reporting that updated share price. Box will be trading on the New York Stock Exchange under the symbol BOX.

The pricing is higher than the $11 to $13 price per share the company was planning on last week. With the new pricing, the company is valued at around $1.67 billion.

Box, founded in 2005 by CEO Aaron Levie and Dylan Smith, first filed to go public in March but then wavered with its plans as the year went on, citing market problems. It wasn’t until this month that the company formally made public that it planned to go forth with its IPO plans.

In the filings, Box said it has over 32 million registered users and 44,000 paying organizations.

For the nine-month period ending October 31, 2014 Box landed $153.8 million in revenue while taking in a net loss of $121.5 million. It also had operating expenses of $242 million in operating expenses during that same time and has an accumulated deficit of $482.7 million.

Here’s a look at some of Box’s financials per the SEC filing:

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Update: Box confirmed the price in an announcement.

Box back on track for IPO; valued at roughly $1.5 billion

Box laid out the details of its long-awaited IPO and plans to raise $186.9 million with the company valued at roughly $1.5 billion, the startup detailed in an SEC filing on Friday.

The startup, which plans to be listed on the New York Stock Exchange under the symbol “BOX,” will offer 12.5 million shares of its Class A common stock with each share priced between $11 and $13.

The filing also includes Box’s updated financials and user statistics, which the company revised in December. The company claims it has over 32 million registered users and 44,000 paying organizations.

Box took in $153.8 million in revenue for 2014 compared to $85.4 million in 2013 for the nine-month period ending October 31. For that same time period, Box’s net loss shrunk from $125.2 million to $121.5 million.

Here’s a look at some of Box’s numbers per the regulatory file:

Box filing - Jan 9

Box filing – Jan 9

Box cites [company]Citrix[/company], Dropbox, [company]EMC[/company], [company]Google[/company] and [company]Microsoft[/company] as competitors, according to the filing. The filing also states that Box boosted employee headcount from 689 employees in January 2013 to 1,131 employees by the end of October 2014.

Now that the company seems poised for an IPO, all eyes will be on the file-sync-and-share player which has been trying to make a name for itself in the workplace-collaboration space as well with industry specific services and a newly announced workflow-management product line.

Box put off its long-awaited IPO several times last year, first filing to go public in March. When that didn’t pan out, the company decided to take in a $150 million funding round in July. Box CEO and co-founder Aaron Levie recently told Bloomberg Television that the startup “should not have filed when we did,” citing a “bit of a market correction in the tech-stocks space.”

With [company]New Relic[/company] and [company]Hortonworks[/company] both being examples of enterprise startups taking a stab at the public markets in recent months, it will be worth following up on Box to see how its current IPO plans pan out.

Levie tweeted the following on Friday in response to the IPO plans.

Is the Hortonworks IPO a referendum on open source?

This past Friday, Hortonworks made good on its announced intention to present an initial public offering to the market. The shares were initially priced at $16, opened with an initial bid of $24, and closed their first day of trading at $26.48. The shares were down to $24.97 as of Tuesday’s market close. We’ll see how the company does post-holidays.

In the run-up to the IPO, some criticism of it emerged, based (understandably) on the company’s startup status and current lack of profitability. Revenues may be substantial, but if costs exceed Hortonworks, you can’t blame people for being skeptical around its shares.

Suffice it to say, there are plenty of companies in the data sphere whose business model seems to be all about the exit. These companies are less built to be profitable than to be bought by profitable companies that don’t feel like building competing products themselves. That premise feels non-compliant with the laws of business gravity I learned over my own career, but it does at least follow a certain logic. And Hortonworks’ pre-profit IPO doesn’t seem any more deviant.

OSS + IPO = ?

The area where I do have questions revolves around Hortonworks’ operational model of bringing 100 percent open-source software to market and monetizing exclusively on training, services and support to its customers (including other vendors).

If we think about recent splashy data IPOs, we quickly arrive at those of Splunk and Tableau. Like Hortonworks, both companies are in the data and analytics space, and Hadoop is a very influential part of their businesses. Tableau is a profitable company whose prospects seem ever-expanding, and Splunk reached profitability several years ago. Both companies deal in commercial proprietary software as their business model (even if Splunk is involved in a number of open-source projects). This makes for a straightforward pitch with shareholders: We make software, we sell licenses for that software, and then we update it and add new products to the portfolio, for which we also sell licenses.

Sometimes the pitch is more nuanced. I remember when two other open source companies, Pentaho and Jaspersoft, first came on the scene. The model both companies adopted was to develop core software and make it available under open-source arrangements but also build and offer higher-end extras for more conventional licensing and sale.

Even with that hybrid approach, back then, in the largely Enterprise world of business intelligence, such a model seemed suspect. Eventually Pentaho and Jaspersoft made their way, though, and as incumbent vendors’ license pricing rose, the efficacy of the commercial open-source model seemed even more apparent. Regardless, Pentaho does not today particularly identify as an open-source company. Jaspersoft, meanwhile, has been acquired by the very commercial software-oriented Tibco.

Hadoop chutzpah

The bottom line of all this is that recent analytics IPOs have orbited around commercial software and even open-source analytics companies who have not gone public have become more commercial. So with those precedents in place, where does Hortonworks, a pre-profit startup dedicated to 100 percent open source, get its nerve? Before offering a hasty response to that question, consider some counterpoints.

To begin with, Hortonworks does make software and it does, even if indirectly, make money from that software. No, Hortonworks doesn’t sell licenses. Instead, it takes a leadership role in developing key components in Hadoop, including Hadoop 2.0’s YARN cluster management layer, the Tez framework that offers interactive services on top of it, and the Stinger initiative that has converted Hive from a SQL abstraction layer over MapReduce to one that utilizes the aforementioned Tez and YARN. And, lest you forget, Hortonworks is a spinoff of the team at Yahoo that drove Hadoop’s creation in the first place.

Elephants in a row

Since YARN and Hive ship with virtually all Hadoop distributions, and as support for Tez grows, Hortonworks’ position as “the” support organization around Apache Hadoop looks increasingly credible.

If Hortonworks made proprietary extensions to Hadoop, those components would not ship with competitors’ distributions. And if Hortonworks were less committed to open source, it might have less influence in seeing some of its projects (like Tez) on-boarded to the Apache Incubator and then reach Top Level Project status. Suddenly, Hortonworks’ open-source strategy seems less naive and less altruistic — in fact, it may be pretty darn shrewd.

Hadoop is becoming a universal data layer, increasingly embedded in other software. Open source may not be the fastest road to monetizing software, but it is a super highway for establishing standards that gain rapid industry-wide support. And since Hortonworks wants to be, quite literally, the standard bearer, its 100 percent open-source mantra actually makes a lot of sense.

Let the market decide

That doesn’t mean it will work. There’s an increasingly pervasive attitude in the analyst community that the open-source model hasn’t been financially rewarding for most companies that have bet on it. Red Hat is offered as the exception, though that offer is usually followed with disparaging remarks uttered under the critics’ breath.

But Hortonworks is bullish on Hadoop, on open source, and on the business model of supporting the big data technology that it helped build and helped establish as an industry standard. Perhaps ticker symbol HDP will serve as a tracking stock for that go to market approach.

After its IPO, Hortonworks is a $1 billion Hadoop company (again)

Shares for Hadoop vendor [company]Hortonworks[/company] finished their first day of trading at $26.48, up from $16 when the company priced its initial public offering on Thursday night and Friday’s opening bid of $24. The company’s total market cap is $1.1 billion at the close of trading Friday, matching the $1.1 billion valuation at which the company raised its last round of venture capital.

Hortonworks IPO day stock chart

There were a lot of questions and speculation heading into Friday’s IPO, fueled by Hortonworks’ lackluster revenue and profit numbers on one hand, and excitement over the Hadoop marketplace on the other. There’s a general belief among information technology types that Hadoop will be ubiquitous in time, the backbone of data architectures for decades to come, but it’s still a cash-intensive business for companies selling it.

Some felt that prospect could scare off public market investors, who are used to software companies with nice, fat margins. It’s especially true for Hortonworks, which offers only open source software and makes its money on support and services. Hortonworks was founded and launched in 2011, after a group of engineers spun the company out from Yahoo, which had been driving much of the work on the open source Apache Hadoop project. But the stock rallied late in a trading day that was awful for most major stocks.

No doubt Cloudera and MapR, Hortonworks’ two largest rivals in the pure-play Hadoop space, will be watching the company’s stock closely over the coming months. MapR also claims a private-market valuation of more than $1 billion, while Cloudera’s valuation is more than $4 billion. If Hortonworks’ stock can maintain steady performance, it might inspire the company’s competitors to test the market for their Hadoop business that are fueled largely by software licenses.

New Relic sets the price: $23 a share to raise $115M at Friday’s IPO

New Relic detailed on Thursday the pricing of its upcoming initial public offering. The company plans on offering 5 million shares of common stock on Friday, with a share price of $23.00. New Relic’s New York Stock Exchange symbol will be NEWR.

According to the company’s latest SEC filing, it estimates to earn roughly $94.9 million from the sale of its common stock.

The application-performance management startup was founded in 2007 and claims it has 10,590 paid business accounts and 250,000 users as of September 30, 2014. It now has 524 employees.

According to the company’s S-1 form, the company took in $63.2 million in revenue for 2014, compared to $29.7 million in 2013. It counted $91.8 million for its 2014 operating expenses, which was quite a boost from 2013, which saw the company generating $47 million in expenses.

Why the Hortonworks IPO could be a bellwether for Hadoop

Hortonworks’ IPO filing on Monday shows that Hadoop is still a resource- and risk-intensive business, but also suggests it’s one that public market investors will be willing to back. It might also start the ball rolling for long-anticipated moves in Hadoop.