back to article So Pure Storage did its IPO thing and investors blinked – now what?

Pure Storage shares went on sale at about $17 today, valuing the all-flash array startup at roughly $3bn. Would they rise or fall after debuting on the stock market? Clue: they fell, from $16.74 to $16.29. If the shares had sold at $17, Pure would have raised $425m. This is an eagerly awaited IPO, as it tests the willingness …

Anonymous Coward

This will be a slow burn...

Look what happened to Nimble and and you'll see the same trend for Pure. Pure cannot keep up the pace of marketing and sales spend now that they are public, they will have to show progress towards profitability. For every dollar of revenue, they are losing two dollars. Either they will raise prices (instead of giving it away as they have been) or they will cut sales and marketing. Either way they are screwed and the investors saw this and went public to recoup their investment.

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Anonymous Coward

Re: This will be a slow burn...

Nimble and Pure are not run the same. One is a conservative outfit making steady progress in the Enterprise taking a bottom-up approach whereas the other other is balls to the wall, overnight sensation and Flash darling that decided on top down approach by directly an taking on EMC & VMAX. They had great success early on but that faded because EMC is dropping their pants with XtremeIO.

As far as the stock goes, the stock doesn't necessarily reflect a company's business especially for vendors like EMC who have billions in stock buy backs or even Netapp. To be fair, if it wasn't for VMware EMC would be in much more trouble.

People are ready for a change. The "Other" numbers reflect that. They are tired of the BS of the EMCs, Dells, Netapps and HPs. They tired of candy-coating, they are tired of flip-floping, they are tired of being powerpointed to death and are tired of promises made which are rarely kept. They are tired of complexity, tired of silos, tired of getting dicked around with licensing and support costs.

Go Pure, Go Nimble, Go SolidFire, Go new Startup Create CHANGE

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Anonymous Coward

Re: This will be a slow burn...

Actually, NMBL has an atrocious/incestuous channel strategy where they have literally thousands of re-sellers and VARs flooding the market and creating channel conflict. They were way more reckless and "balls to the wall" than Pure. Also, I have worked for the small AFA vendor, and the big one. It is true the big guys sat on the laurels, but do you really think the small players can deliver any better on roadmap promises than the big ones? They absolutely cannot. You ought to wake up to this reality.

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Re: This will be a slow burn...

Is that it? Your analysis is that Nimble has too many resellers? Maybe because Nimble doesn't sell direct? Also how many Nimble VARs only sell Nimble? I'd imagine that number to be very low, maybe even non-existent. So why would there be "channel conflict" unless, of course resellers were vying in selling the product which would of course reflect how competitive the product is.

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Anonymous Coward

Re: This will be a slow burn...

My reply was addressing the reply above me. Nimble tried to hire me. They have 60-70 direct field reps in North America. They have an inside team of 40 people. Their channel approach was over aggressive and it is not widely viewed as effective/ethical by the successful, well known resellers. So you understand the channel? Do you understand what channel conflict is? Too many resellers repping the same product in the same account. They look sloppy now. it is a cheap low-end product for the SMB and midmarket. Competitive?? Nein.

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Re: This will be a slow burn...

Working in the UK channel here, I'll bite.

First, being aggressive in the channel isn't unethical, it's perfectly fine if your product does what it says. Start Ups need to get mind share out there because, and no offence to anyone in sales, sales guys will only ever sell the last thing that came across there desk, or what they've known has made them money in the past. The too many resellers argument is absolute bull, everyone sells HP, Dell, Cisco etc. Do they have too many revellers? No. That's why things like accredited partner discounts exist so that you can't all position the same product.

What is unethical in the channel is:

- over promising and underdelivering what the product can do (making everyone look bad)

- poaching large deals from resellers for internal sales

- dropping the ball on promised support

Your mileage may vary but I personally haven't had any of those things from Nimble.

As for the Pure IPO, this was kind of expected. Just have to see how the market goes. Their support staff have been excellent whenever I've had to deal with them so they're alright in my books.

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Re: This will be a slow burn...

Hello there Mr. Pure Storage salea rep.

You dismiss EMC dropping their pants. Their long datacenter dingdong will steamroll Pure and all these Flash startups. They can drop their trousers all day cus Xtremio like Pure is cheap commoditty hardware. The materials cost for a 50TB atray from either vendor is around $80k.. Tops. And EMC can operate with a dingleberry of margin while Pure starves.

The stock price does reflect what the street and associated algorithms say about the stock. And Pure is massively overvalued because as the article says, the technology is a commoddity.

Keep up your cheerleading. It will keep you warm as the ship sinks. Best hope is for some company to acquire Pure. Now. Who would do that? Not EMC. Not HDS. Not HP. Hmmm who would pay 3 BEEEEELION for commoddity technology?

Nobody.

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Silver badge

HP has two new all flash arrays

the 20k which is bigger, came in June then the 8k series which is smaller came in September.

I too agree there does not seem to be a bright future for Pure, can't help but think of Violin and Fusion IO.

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Anonymous Coward

Re: HP has two new all flash arrays

Nobody cares but you.

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Silver badge

Do all these upstarts, er start-ups, have silly names because all the good .com names are gone?

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Anonymous Coward

Yes!

I've often thought there's a comedy sketch to be written about the stupid lengths these companies are willing to go to, to try and stand out and don't get me started on the incorrectly spelled ones of which Peeple.com is merely the latest example.

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Given that Donuts are in fierce competition with XYZ for the top level domain market I think your assessment is right.

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More questionable numbers????

After the Gartner over-inflated, yet uncorrected (by Pure Storage) revenue claim scandal, maybe El Reg would like to follow up on another odd financial conundrum that appeared today.

When Pure Storage announced their last F-1 private funding round there was much talk from the "Pure" CEO about the company being valued at "over $3B" after raising $225M. Today, however, a lot of the press coverage was of the stock finishing at $16.01 after the first day's trading putting a market cap/valuation of $2.9B on Pure Storage (i.e. under $3B).

The only problem seems to be that the stock price of the F-1 funding round is available for all to see in the SEC S-1 filing at $15.73. Since it is reasonable to assume that there are now significantly MORE shares of stock in the company (given the ~25M issued as part of the IPO), and the fact that the price is higher (at $16.01) than it was at F-1 (at $15.73) it would seem to be impossible using simple arithmetic to have a HIGHER valuation at the time of the F-1 round (i.e. "over $3B" claimed by Scott Dietzen), than the actual valuation today - $2.9B.

Was Pure Storage and their CEO being economical with the truth at the time it announced its F-1 funding round valuation in the same way it was economical with the truth when it didn't repudiate Gartner's revenue figures for Pure Storage? Is a pattern emerging?

For a company that prides itself on being Pure and Puritanical, it seems that the other side of the ethical line is shaded too often. Buyers beware...

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Anonymous Coward

Re: More questionable numbers????

Happens all the time. I was a VC person. Essentially, their valuation is about flat, or slightly down, from the last private round. VC guys want to get paid, so do execs. If you live in a world where you think company valuations can only go up across funding phases, then you live in your own parallel universe. Sorry, that is the case. So, what does that say about Pure's IPO and progress? Exactly. You may want to short this.

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Anonymous Coward

Re: More questionable numbers????

To clarify my statement above "VC guys want to get paid, so do execs", what I am saying here is that companies IPO as a reward/exit for the early investors (VCs, angels, etc), the founders/execs, and employees. They don't IPO necessarily because there was valuation accretion from their last round. That is what I was explaining. That is why most IPOs are not accretive to the general investing public 6-12 months after an IPO. They are doing a public float fund-raise, often selling at a high, not at a bargain.

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Re: More questionable numbers????

Not quite my point though I understand that the valuation could easily be down from a private round to the IPO.

The issue I am questioning is if $16.01 x (X+~25M shares) equals a $2.9B valuation TODAY (X being the share count at the F-1 funding round, and 25M are the newly issues IPO shares), then how can $15.73 x X equal an "over $3B" valuation back in 2014. The arithmetic doesn't work.

Was the Pure Storage CEO just claiming an over-inflated "over $3B" valuation in 2014 just to boost the company, when the valuation would seem to have been clearly way under $2.9B using simple arithmetic?

Pure Storage allowed that kind of stuff to slide with Gartner Revenue numbers, did they also do it with "claimed" valuation?

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Re: More questionable numbers????

To ask the question from my simple maths (rather than being knowledgeable as an investor) 'if Pure has just raised 425M then it must have been worth 425M less than the 2.9B market now! I read that as 2.5B or less. '

Methinks Pure was even slicker at marketing to VCs than to customers - new career beckons for the Execs?

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Anonymous Coward

Re: More questionable numbers????

25 million is in the amount of shares in this public float, not the total amount of shares on the books. The majority of the shares are still held by the founders and VCs, until lock up expiration dates at least. I think I read 180 million shares total in the S-1 but I would have to look at it again since it has been some time.

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Anonymous Coward

Re: More questionable numbers????

180 million shares times $17 a share get you the ~ 3 billion dollar valuation

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Anonymous Coward

Re: More questionable numbers????

they now have $425 million in cash in exchange for floating 25 million shares to the public. it is a wash therefore in the valuation. missed finance class often?

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Re: More questionable numbers????

Pure's data reduction engine has clearly been put to use to calculate their valuation.

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Anonymous Coward

Good at heart

I've heard that Pure is taking on the competition by not sucking at technical support - an attitude of fixing problems rather than arguing that they don't exist. I interviewed for a job there and was taught a few things that, in hindsight, I should have known. There were no silly questions asked at all. They were sharp.

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Anonymous Coward

Re: Good at heart

??? Are you serious ?

They are just a bunch of arrogant ba*ds.

They presume it is confidence :-)

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This post has been deleted by its author

Anonymous Coward

I've seen this article somewhere else...

First the writeup is good. It is going to be fun to see where Pure and any of the other storage startup goes. I'm betting against them all.

I will point out that I would not take this particular IPO as a sign that Nutanix or Simplivity will suffer the same fate. HCI is an actual valuable thing. It has legs and real ROI. (no, I don't work for or resell any HCI)

All that said, I'VE READ THIS ARTICLE SOMEWHERE ELSE... Lemme consult google....

Ah right - here:

http://www.watts-innovating.com/when-purity-is-diluted-by-the-investment-innovation-challenge/

What strikes me as sick is the Register's response to it here:

http://www.theregister.co.uk/2015/08/22/glass_house_stone_throwing_exercise/

So a blogger bangs out his thoughts, and El Reg hates it, THEN, proceeds to riff on exactly what the blogger was pointing out in the FIRST place.

C'mon man,

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Anonymous Coward

No Surprises

Pure's day of reckoning has been coming since before they IPO'd. Too many spectators bought into their All Flash story like it wasn't what it is, a flash in the pan. All one had to do was look at the number of "built from the ground up, yada, yada, yada, storage companies who were actually selling hybrid arrays, and then do a quick back of the envelope on which ones might build an AFA soon, and then ask "why would I consider giving Pure a premium, say like NetApp anywhere from '1996-2003/4"? Forget the semantics on whether DOT was really that different, but the Filers were walking our the door then (Pure's are not), they were profitable (Pure should patent the particular hue of crimson they produce, though they would be in suit with ServiceNow on that one - someone say Frank?), and apart from the Big 4 at the time (EMC, HDS, IBM and HP), there was basically no competition. In fact compared to the market today, there was no competition outside of the incumbents (problematic when a $2-$3B valuation assumes almost unfettered growth?).

How they actually got near their forecast IPO price is a lesson in great marketing.

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