Box Performs Well on Day One as a Publicly Traded Company

By Chris Preimesberger  |  Posted 2015-01-24 Print this article Print

David Lavenda, vice president of product strategy at enterprise collaboration player, had a completely different take.

"This is the end of Box," Lavenda told eWEEK. "Even if the IPO is successful, the file sync and store game is over. Box missed its opportunity, and the world has moved on. Storage has become a utility like electricity or water, and the companies that have managed to grab huge swaths of customers will survive/thrive while everybody else eats their dust, and then inevitably fold.

"Box's repositioning as a lightweight enterprise document management system may have been a good move for an earlier stage company with big cash reserves, but Box burned huge amounts of cash with little to show for it. After missing the initial IPO opp, Box should have hunkered down and honed its new offering until it was ready for prime time, rather than blowing through $168M in cash—most of it on sales and marketing, nonetheless. That much money on sales and marketing of file storage is absurd.

"With so much cash down the tubes, there aren't many viable suitors for Box either. So, would I recommend investing in Box? Paraphrasing Dr. Seuss, I would say: 'Knocks on stocks who flocks to Box.' Caveat emptor," Lavenda said.

Vineet Jain, co-founder and CEO of Egnyte, told eWEEK that "after a well-timed delay, we are finally going to see how a Box IPO plays out in the market. Even with its massive discount on share pricing right now, there are a lot of factors in play here for potential Box investors—both short term and long term.

"Over the short term it is very simple: Box needs to make friends right now. By debuting with dual-class shares, similar to the approach taken by companies including Facebook and Workday, they will need to make believers out of the general public right now in order to successfully sell a large amount of their stock in the early stages," he said.

"In the long term, Box is presenting a very high-risk, high-reward scenario for investors. With Microsoft and Google essentially making cloud storage a free commodity, they will need to diversify beyond storage and create more unique value. The key will be profitability in the long run.

"I certainly hope Box can rise to the occasion. This is a major inflection point for our space as a rising tide will raise all boats. So as we approach the ringing of that opening bell, I do wish Aaron and his team the best of luck," Jain said.

Yorgen Edholm, CEO of Accellion, is one industry leader who believes that the lower IPO price that Box is setting actually doesn't matter, "because the price everyone will really care about is what it is six months from now, or six years from now," he told eWEEK.

"From a liquidity perspective, the longer term price is light years more important. While it might mean they raise less money now, that could actually be good as it may force Box to adopt a more efficient business model, which over time will make them a stronger competitor."

Ranjith Kumaran, founder and CEO of Hightail, was among those with good wishes for Box. "I definitely hope Box's IPO goes well, since a successful offering will benefit all the vendors in the category," Kumaran said.

"I believe Box will get there. Though the investor community has been a bit spooked by their huge cash burn, they also recognize the massive disruption that cloud file sharing represents, and it remains an incredibly valuable space. It's certainly one that my company is excited to be part of, even if our approach and target market is very different than Box's."

Ajay Patel, co-founder and CEO of secure enterprise collaboration software provider HighQ, was wary of the market reaction.

"With market sentiment cooling off, any adverse reaction to such a high-profile listing is likely to have a profound impact on the wider tech market, both on listed and private companies," he said. "A large number of players in the VC market have invested in Box, and it is in their interest (and their portfolio companies' interests) to ensure there is no collateral damage from this particular IPO.

"When Box filed its S-1, their financials shocked the market; in particular, the scale of losses ($168 million) and the admission that these are likely to increase. If the decision to delay the IPO is in the hope of a rebound in sentiment, this could be a risky strategy. Until now, investors have been comfortable with high valuations based on impressive top line growth. We could be seeing the beginning of a trend where more weighting is placed on profitability. If this is the case, Box may need to completely rethink their freemium business model and sacrifice growth for profitability (or reduced losses).

"If it happens, the Box IPO will be the biggest story of the year. Box is a company admired by investors and customers alike. It has positioned itself as a major player in arguably one of the biggest software market niches: cloud collaboration. As CEO of a competitor company, I sincerely hope that this IPO is a success," Patel said.

Has Taken More Than a Half Billion in VC Funding

Box has banked a total of $546.1 million in venture capital funding over its 10-year history.

Though sales have been good—it claims about 5 million individual users and about 200,000 business customers—Box has yet to see black ink in its financials. In its required SEC S-1 filing a year ago, Box showed a net loss of $168 million from the fiscal year that ended Jan. 31.

Lately, however, things have been looking up. Box's revenue improved 80 percent to $153.8 million in the nine months ended Oct. 31, and its net loss fell to $121.5 million.

Box's corporate customers include such household names as Ameriprise Financial, Eli Lilly & Co. and Gap Inc.


Chris Preimesberger

Chris Preimesberger is Editor of Features & Analysis at eWEEK. Twitter: @editingwhiz
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