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From: Glenn Petersen1/6/2017 11:36:21 AM
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Dropbox Could Have One of 2017’s Most Interesting IPOs

The company became a valuable tech “unicorn” by offering free cloud storage to hundreds of millions of people. Can Dropbox find a way to last by cashing in on corporate users?

by Peter Burrows

MIT Technology Review

January 3, 2017

Of the big IPOs expected to occur in 2017, Dropbox’s could be one of the most intriguing.

When Dropbox last raised money, in 2014, it was valued at a hefty $10 billion. But large investors such as Fidelity and T. Rowe Price slashed the value of the Dropbox shares on their books by as much as 50 percent in 2015. The key concern: could a company whose free file storage service is used by hundreds of millions of people find enough paying customers to make a great business?

Investors may be in for a pleasant surprise. According to people familiar with the company’s finances, sales are running at more than $750 million a year, up from around $400 million in 2014. That’s thanks in part to growing sales of Dropbox Business, a souped-up version of the free app that costs $150 per employee per year. The company has been cash-flow positive since early 2016, even as it has made heavy investments in engineering, sales, and IT infrastructure.

Now CEO and cofounder Drew Houston is leading a new strategic charge. In addition to selling utilities to keep digital files safe and accessible, Dropbox intends to offer software that businesspeople use for hours each day to create content and get work done. The company will say more about its product roadmap on January 30, according to an invitation sent to reporters.

“This is a mature, very, very powerful software company,” says Bryan Schreier, a partner with venture capital firm Sequoia Capital, which was an early investor in the company.

That doesn’t mean Dropbox will live up to that heady $10 billion valuation, which even at the time was widely seen as a sign of a bubble about to burst. Even if annualized revenue hits $1 billion by the time Dropbox goes public, investors would still need to think the company is worth 10 times its current sales. These days, the average cloud software company trades at just 4.7 times revenue, according to Bessemer Venture Partners.

Still, Schreier and other investors insist they are no longer worried about Dropbox’s fundamental business model. About 10 million new people start using the free consumer product every month. An increasing percentage of those users sign up for the $100-a-year Pro version, which offers more storage and sharing features. Many of those Pro customers use Dropbox at work, and once their employers realize how popular it is they are more likely to step up to Dropbox Business, which is designed for use by teams rather than individuals. So far more than 200,000 companies have signed up for Dropbox Business, up from 50,000 in 2014. While most are small and medium-sized companies, a few big companies such as Expedia and News Corp. have more than 10,000 seats.

A successful push into productivity and collaboration software could give corporate customers much more to buy from Dropbox. The first example is Paper, which provides a kind of virtual white space where employees and contractors can share Excel spreadsheets, Google Docs, and other digital assets regardless of what device they are using. The idea is to tie together scores of different productivity tools and fold in management tools to help teams keep projects on track. Paper has been in beta since late 2015, but appears to be nearing a general release.

“Paper is going to be really important for us,” says chief operating officer Dennis Woodside, who declined to comment on IPO plans or on the company's revenue. “In five years, you could start a business on Dropbox: that is something we aspire to.”

Dropbox's Growing User Base - Highcharts CloudChart context menuDropbox's Growing User BaseNovember 2012May 2014June 2015March 20160 million100 million200 million300 million400 million500 million

Dropbox is far from the only company looking to change the way work is done. Google offers G Suite, which contains business versions of apps such as Google Docs and Gmail. Facebook has a collaboration service called Workplace. Microsoft is improving its cloud offerings as it seeks to defend the massive market share earned with its Windows and Office monopolies. Box has strong traction with companies in highly regulated industries like health care and financial services, while younger companies such as Asana, Atlassian, and Slack already handle elements of what Dropbox aims to do. According to Gartner analyst Karen Hobert, there are 130 companies just in the electronic file storage and sync market.

Yet even rivals see Dropbox as a likely survivor of the inevitable consolidation. The overall market opportunity for productivity and collaboration tools is $30 billion, if you replace all those PC disk drives and traditional Windows or Mac programs with cloud-based alternatives. “That’s an order of magnitude more than the combined revenue of all the players today,” says Box chief executive officer Aaron Levie. “As everything moves to the cloud, there’s going to be plenty of opportunity.”

Fending off challenges

Dropbox has been bulking up for this opportunity since 2014, when Houston hired Woodside. A former McKinsey consultant, Woodside joined Google in 2003 as an operations expert, before running U.S. sales and then the Motorola Mobility cell phone division. At Dropbox, he’s hired more than 200 salespeople, up from zero when the company relied solely on Internet clicks. The engineering team has more than doubled to more than 1,000 members, large by any measure. And he has overseen a massive, risky IT overhaul. While most companies are moving more of their business onto public cloud platforms like the one run by Amazon Web Services, Dropbox has shifted billions of its U.S. customers’ files away from Amazon’s platform to three of its own data centers. That way, Dropbox can tweak its network to cut the time it takes to store and sync traffic.

The result is more of a traditional enterprise software company than the hyper-efficient app maker Houston founded in 2007. The idea for the company came when Houston realized during a long bus ride that he’d forgotten the USB drive with his work files at home. The resulting cloud-storage app was a sensation with people who felt his pain. By 2012, Dropbox had 100 million registered users.

Then things got difficult. Giants such as Amazon, Apple, Microsoft, and Google began giving away cloud storage capacity as a way to sweeten other offerings. As prices collapsed, cloud storage specialists faced an existential threat. Even though Box has been farther ahead than Dropbox in focusing on corporate customers’ needs, it still struggled to gain investors’ confidence after going public in early 2015. Until recent weeks, Box shares traded well below the original offer price of $14 per share.

Do you think you could use better cloud collaboration tools like the ones Dropbox might offer? Tell us in the comments.

A successful move by Dropbox into the huge productivity and collaboration software market could brighten the outlook, but it will require the company to pull off two tough transformations at once. Dropbox is still evolving from a maker of a free consumer app to a corporate IT infrastructure company. Now it must also move from selling technology that’s designed to be as invisible as possible—after all, people love Dropbox because they don’t have to think about it—to making products people use much of their day. Again, Box provides the cautionary tale. It introduced a Paper-like product three years ago called Box Notes. But Levie admits that its reception has been less than overwhelming. Box plans a “major relaunch” this year.

Woodside responds that few companies have the scale, the technical expertise, and the brand to pull off its ambitious plans. “There’s close to two billion knowledge workers in the world, and I know this much: the tools they’ll be using in five years are not the ones they’re using today,” he says. Companies with huge numbers of loyal customers have a huge leg up in figuring it out, he argues. “Is the number 500 million? A billion? I don’t know. But we have a shot.”

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From: Sam1/26/2017 2:36:36 PM
1 Recommendation   of 1472

Microsoft earnings: Expect bigger shift to cloud as Azure closes in on AWS
MARKETWATCH 1:20 PM ET 1/26/2017

Symbol Last Price Change
64.43 +0.75 (+1.18%)
QUOTES AS OF 02:34:28 PM ET 01/26/2017

Azure and Office365 to benefit from improving PC trends

Stronger PC trends are expected to benefit Microsoft Corp.(MSFT) on Thursday, when the Windows parent reports second-quarter earnings after the market closes.

Improving PC shipments may be a boon to Microsoft's(MSFT) cloud-based software and enterprise services during the quarter. Worldwide shipments of traditional PCs declined 1.5% year-over-year to 70.2 million last quarter, much improved from a 5.7% decline ( 2017-01-11) in the year-earlier period.

This will be the first full quarter of hardware sales since Microsoft(MSFT) introduced new Surface and Windows products in October, including a new $2,999 Surface PC called Surface Studio. The quarter will also reflect holiday sales.

Also see: Apple demolished by Microsoft(MSFT) at dueling PC events ( microsoft-at-their-respective-pc-events-2016-10-27)

Here's what to expect:

Earnings: Sell-side analysts surveyed by FactSet expect Microsoft(MSFT) to report a non-GAAP profit of 79 cents a share, compared with 78 cents in the year-earlier period. Contributors to Estimize, a software platform that uses crowdsourcing from hedge-fund executives, brokerages and buy-side analysts to predict earnings, expect Microsoft(MSFT) to report 81 cents a share. The company surpassed both consensus estimates by a wide margin the past two quarters. It has a long history of beating EPS expectations.

Revenue: The company is expected to report revenue of $25.3 billion, compared with $25.7 billion in the year-earlier period, according to the FactSet and Estimize consensus estimates. Microsoft(MSFT) has topped both expectations in each of the last five quarters.

Stock reaction: Shares of Microsoft(MSFT) have underperformed the market since its last earnings report. The stock has increased 4.1% in the past three months and 23% in the past year. By comparison, the Dow Jones Industrial Average, of which Microsoft(MSFT) is a member, is up more than 10% in the past three months and 26% in the past year. The average rating on Microsoft's(MSFT) stock is the equivalent to buy, while the average 12-month price target is $63.61, according to a FactSet survey of roughly 30 analysts. Shares of Microsoft(MSFT) closed at $63.68 Wednesday.

What to watch for: Pacific Crest analyst Brent Bracelin reiterated an overweight rating and $70 target on the stock this week and said he expects "another solid quarter" that should reinforce his "bullish stance on the company's progress in pivoting from haggard to leader in cloud, digital and artificial intelligence."


Braceline raised his fiscal 2017 revenue estimate on Microsoft(MSFT) last week, citing increasing cloud adoption and share gains in the software-as-a-service market with Office 365 and Azure.

Citing strong adoption of Azure, the closest competitor to Inc.'s (AMZN) web services division, analysts at Macquarie raised their price target on Microsoft's(MSFT) stock this week by a dollar to $61. However, they said volatile foreign currency trends kept them from "dramatically increasing" their below-consensus estimates.

Analysts at Estimize said Azure is "now firmly the second-best cloud computing platform," only behind AWS. According to FactSet, Microsoft(MSFT) is expected to report sales of $6.7 billion in its intelligent cloud business, compared with $6.3 billion in the year-earlier period.

-Jennifer Booton; 415-439-6400;

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From: FUBHO3/22/2017 7:28:44 AM
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Cloud Machine Learning Engine Training Unit-Hours: 7.487 Hours costs $3.67. This compute time included GPU resources.

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From: Glenn Petersen3/30/2017 2:29:19 PM
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Dropbox Secures $600 Million Credit Line Ahead of Expected IPO

The debt facility provides flexibility as the cloud-storage company explores a public offering as soon as this year.

by Dina Bass and Alex Barinkin
March? 30,0 2017

Dropbox Inc. is opening a $600 million credit facility from six banks led by JPMorgan Chase & Co., said people familiar with the plans, as the cloud file-sharing startup pushes toward an initial public offering as soon as this year.

The line of debt has commitments from the banks and is expected to close on Monday, said the people, who asked not to be identified because the deal isn't finalized. The financial security provides Dropbox with flexibility as it deliberates an IPO.

The San Francisco-based startup has been meeting with bankers to discuss plans to list, people familiar with the talks said. While the company hasn't set specific timing, potential advisers believe it will be ready to go public by the end of this year. Dropbox and its lenders declined to comment.

Dropbox has said it's not in a hurry to go public and that the business is nearing profitability. The company is cash-flow positive, with annualized revenue of more than $1 billion, Chief Executive Officer Drew Houston said last summer. Dropbox could tap debt if it wants to expand more aggressively or make acquisitions, said one of the people. It never touched a smaller credit facility, which was expiring, the person said.

Dropbox CEO Drew Houston.
Photographer: Tony Avelar/Bloomberg

After opening up in 2007, Dropbox gained a loyal following from people looking to store photos and other files in the cloud, making them available from any computer or mobile device. It rode this wave to a $10 billion valuation in early 2014, vaulting it to become one of Silicon Valley's most valuable unicorn startups. A few months later, it secured a $500 million credit facility led by JPMorgan.

Box Inc., a rival file-storage company, went public in 2015. After popping on the first day of trading, Box lost 40 percent of its market value over the course of that year. Dropbox's private investors soon began scrutinizing the startup more closely, and mutual fund backers wrote down the values of their stakes.

Dropbox has shifted to focus on selling its cloud service to larger businesses, which has helped boost revenue. It has also cut costs, partly by building data centers instead of relying on Inc.'s cloud storage. Dropbox's growth is encouraging, and its cash generation is impressive compared with most other unicorn businesses, said a banker close to the deal.

In addition to JPMorgan, participants in the new debt facility include Bank of America Corp., Deutsche Bank AG, Goldman Sachs Group Inc., Macquarie Group Ltd. and Royal Bank of Canada, said the people. For the banks involved, taking on the risk of lending to an unprofitable private company can help them win a role underwriting an eventual IPO.

When Snap Inc. sought advisers to go public, the company placed a big consideration on which banks had been willing to extend credit in the past, according to people familiar with the matter. Aside from boutique advisory firm Allen & Co., Snap's roster of lenders claimed the main IPO underwriter spots, gaining the biggest fees and most prominent roles. Meanwhile, Bank of America declined to lend to the money-losing company and didn't have a role in Snap's listing, the people said.

Dropbox's cash flow and more predictable subscription revenue make it a less risky borrower than Snap. Dropbox's incentive for raising the new credit facility was to replace the one that's expiring and wasn't determined by IPO timing, said one person familiar with the plans. The company got better terms by setting up a new line of credit from these banks, rather than renewing the previous one, the person said.

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To: Glenn Petersen who wrote (1375)4/27/2017 12:56:01 PM
1 Recommendation   of 1472
Dropbox Inc.'s chief executive officer said the company is now generating a profit excluding interest, taxes, depreciation and amortization, a key metric that investors are watching as the file-sharing software maker moves closer to becoming a public company.

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From: Glenn Petersen4/28/2017 9:15:02 AM
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AWS revenue up 42 percent to $3.66 billion in Q1 2017, operating income reaches $890 million

by Tom Krazit
on April 27, 2017 at 1:18 pm April 27, 2017 at 3:47 pm

The crown jewel of Amazon’s business, Amazon Web Services, posted a 42 percent jump in revenue during the first fiscal quarter of 2017, as it continues to set the standard for cloud computing.

For the period ending March 31st, AWS recorded revenue of $3.66 billion, up from revenue of $2.57 billion in the year-ago quarter. Operating income rose 47 percent compared to last year to reach $890 million, which provided the lion’s share of the total operating income for its parent company during the quarter.

AWS revenue growth does appear to be backing off the torrid pace it enjoyed a few years ago, but 42 percent is still pretty strong. The company announced it captured several new high-profile customers during the quarter, such as Dunkin Brands, Liberty Mutual, and IPO darling Snap, which had previously relied on Google for the bulk of its cloud infrastructure.

On a conference call with reporters following the release of the results, Amazon CFO Brian Olsavsky acknowledged that AWS growth had dipped a bit, and said the division is still on pace to do $14 billion in annual revenue, the same number quoted last quarter. He also highlighted database growth during the quarter — a topic Amazon brought up several times last week at its AWS Summit in San Francisco — saying that over 23,000 databases had been migrated to AWS since January of last year.

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From: Glenn Petersen4/30/2017 6:53:28 PM
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Amazon’s cloud gain could be Google’s cloud loss

Google could have a harder time catching up to Amazon

by Tess Townsend
Apr 28, 2017, 7:21pm EDT

Jeff Bezos Alex Wong/Getty Images


Cloud is one of Alphabet’s fastest growing businesses. And the massive size of Amazon’s cloud offering, Amazon Web Services, and the growth of Microsoft’s own cloud business, Azure, is not good news for Google.

Despite the fact that cloud is still a relatively new industry with lots of room for growth, early entrants are more likely to dominate.

That means it’ll be that much harder for Google to catch up — or, as Google executive Diane Greene recently said, surpass big players like AWS.

One reason for this is that for every customer Amazon gains, that’s a potential addition Google has lost. Changing from one cloud provider to another is technically extremely difficult, making it a better approach to nab companies as they first buy into cloud services rather than luring them in later.

Amazon’s cloud business grew 43 percent to $3.7 billion in the first quarter. Microsoft’s Azure gained 93 percent in the same period. The company doesn’t break out revenue for Azure, but the unit was reported to make $2.7 billion in 2016.

Google also doesn’t break out cloud revenue, but what AWS makes in a quarter is easily more than Google cloud makes in a year. Also, should Amazon see any threat from Google or Microsoft, it could just as easily lower its rates and weather the losses to gain marketshare. That’s usually been CEO Jeff Bezos’ playbook.

Still, there’s a lot of room for growth in cloud. Gartner predicts that by 2020 the market will reach $383 billion. And Amazon’s growth is decelerating.

So if Google continues to gain large customers — it recently announce HSBC and SAP were using its public cloud — it can gain ground, but it’s working against a penalty for being a latecomer.

Alphabet lumps cloud revenue into Google’s other revenues, which grew 50 percent year over year, from $2 billion in the first quarter of 2016 to $3 billion in the last quarter. Hardware and software are also in that mix.

It’s not clear how much of the $3 billion is from cloud, but cloud is “one of the fastest growing businesses across Alphabet” and saw the most sizable headcount growth of all product areas, Alphabet chief financial officer Ruth Porat said during the earnings call Thursday.

An RBC estimate put Google cloud’s annual run-rate revenue at about $1 billion as of the end of 2015. Even if revenue has grown significantly in the last year, it looks like it will continue to be dwarfed by competition unless Google ramps up its on-boarding of big new customers or makes major acquisitions.

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To: Glenn Petersen who wrote (1101)5/1/2017 11:31:57 AM
From: Glenn Petersen
1 Recommendation   of 1472
Three years later:

Collaboration software company Jive to be acquired by Aurea for $462 million

by Ron Miller ( @ron_miller)
May, 2017

Jive, a community collaboration software company that was one of the biggest Enterprise 2.0-era success stories, going public in 2011, announced today it had agreed to be acquired by ESW Capital’s Wave Systems for $462 million. It will become part of the Aurea family of companies.

In the end, it was a kind and healthy exit for Jive shareholders. ESW paid $5.25 a share to purchase the company, representing a 20 percent increase over the average of Jive’s closing stock price for the three months ending on April 28, 2017. It had closed on Friday at $5.05 a share. Needless to say, Jive’s board jumped at the offer and voted unanimously to approve the deal.

The plan is to integrate Jive into Aurea’s customer experience management platform. The acquisition gives Aurea a tool for creating internal and customer-facing communities, a key piece in today’s customer service environment. It also gives them access to Jive’s customer base, which includes T Mobile, Schneider Electric, McAfee and EMC.

Scott Brighton, CEO of Aurea sees the community component strengthening the overall platform. “Jive, in combination with Aurea, enables us to bring customer experience and employee and customer engagement together,” he said in a statement.

Rachel Happe, principal at Community Roundtable, a firm that helps companies implement communities, wasn’t surprised by the move. “The social software market has gotten much, much bigger and Jive was facing competition from both bigger players and small niche players, without the benefits that either provide. What happens next for Jive and its customers is less clear as few details have been revealed,” she wrote in an email.

Alan Pelz-Sharpe, principal at Deep Analysis, who has been watching this space for many years sees it as a good deal for ESW and Aurea. “ESW Capital has made a good deal ensuring the long-term and profitable future of Jive. In my experience of the firm, [Jive] not only has good albeit legacy software, they do take their customers seriously and have a very engaged customer base. All in all everything a PE firm is looking for,” he told TechCrunch.

It would appear with this sale, we are seeing the official end of the Enterprise 2.0 era, which had its hey day in the 2006-2012 timeframe. Jive along with Yammer, Socialcast, Socialtext and a host of others came to prominence during this time and brought a lot of promise of changing the way businesses communicate internally and externally.

It all began in 2006 when then Harvard professor Andrew McAfee (he has since moved onto MIT), coined the term Enterprise 2.0. Instead of getting bogged down in long email threads, employees could talk directly to one another in teams and communities via a more natural communications interface. They could also create their own content with blogs, wikis and other tools instead of relying on a group of experts to publish the content for them. Eventually this would extend outside the company as well.

The era peaked when Jive went public in 2011 and Yammer was sold to Microsoft for $1.2 billion in 2012, representing two of the biggest success stories of the time.

A couple of years later Slack was released and has taken the enterprise by storm. It, along with the recent release of Workplace by Facebook and Microsoft Teams, has created a new generation of more modern tools.

Alan Lepofsky, an analyst with Constellation Research who covers collaboration and community in business sees the era ending, not so much because of the recent additions, but because the biggest companies including Microsoft, Salesforce, Cisco and IBM finally caught up with Enterprise 2.0 functionality.

“The big guys caught up and filled the gap that the original e20 vendors temporarily filled,” he said. As for Aurea, Lepofsky sees it giving them a tool to compete with Salesforce Communites in the Customer Experience space.

Perhaps it was inevitable that Jive one of the last of that original wave of companies standing would be sold. It’s actually a good match on its face — a good deal for Jive shareholders, while giving Aurea a solid tool community and collaboration for its platform.

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From: Glenn Petersen5/5/2017 10:41:26 AM
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Google Cloud growth is outpacing the company's ad business

Turns out, the company's enterprise push is working out

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From: Glenn Petersen5/14/2017 11:55:54 PM
   of 1472
Nvidia announced a plan to go up against Amazon, Google and Microsoft
  • Nvidia announced the launch of a cloud service for developers to train artificial intelligence models.

  • But the company, whose stock has been on a tear this week, already sells its graphics processing units to the biggest cloud companies to do just that.

  • What it means is that Nvidia plans to directly compete with Amazon Web Services, Microsoft's Azure, and Alphabet's Google Cloud Platform.

Jordan Novet | @jordannovet
Wednesday, 10 May 2017 | 7:06 PM

Jacob Kepler | Bloomberg | Getty Images
Jen-Hsun Huang, president, chief executive officer and co-founder of Nvidia, speaks during the 2011 International Consumer Electronics Show in Las Vegas on Wed., Jan. 5, 2011.

Nvidia, a company that sells graphics cards for computers and other devices, Wednesday announced the launch of a cloud service for developers to train artificial intelligence models.

But the company, whose stock has been on a tear this week, already sells technology to the biggest cloud companies — Amazon, Alphabet, and Microsoft — to do just that.

What it means is that Nvidia plans to directly compete with Amazon Web Services, Microsoft's Azure, and Alphabet's Google Cloud Platform — to whom it now sells its graphics processing units for their cloud services. Those cloud services, in turn, provide GPU-backed virtual machine instances that developers use to run their AI workloads.

The move could lead companies that need these services to forgo the biggest cloud companies and go directly to Nvidia. Naturally, those big cloud companies that are buying GPUs from Nvidia now aren't going to look favorably on this move, and will likely try to enhance their offerings or lower their prices.

To be clear, Nvidia isn't building a whole cloud infrastructure from scratch. Instead it will rely on public cloud providers like AWS to run its service. But Nvidia will still be competing with those providers in this very particular space.

The new service will become available in public beta in the third quarter, Nvidia said in a blog post. Pricing information is not yet available.

The Nvidia service will let developers use frameworks like CNTK (from Microsoft), MXNet (promoted by Amazon) or TensorFlow (from Alphabet) for "deep learning," a type of AI that involves training artificial neural networks on lots of data and then getting them to make decisions based on that.

Intel, the biggest U.S. chipmaker, has yet to introduce a similar service but could do so in the future.

Yesterday lNvidia beat analysts' estimates for quarterly earnings per share and revenue.

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