This is it. This is the one that would eventually define the next phase in the storage networking industry.
In a brief 5 to 6 years, solid state storage, notably NAND Flash, has been dominating the headlines. The ability of Flash to accelerate applications in terms of IOPS and latency has almost flipped the entire storage landscape. This disruption has allowed many new up-starts to challenge the Big 6 hegemony.
For more than a decade, the enterprise storage landscape has been dominated by EMC, NetApp, HP, IBM, HDS and Dell. And these big enterprise storage systems have designed their software file systems and operating environments around the spinning mechanical hard disk drives (HDDs). Flash storage has changed all that, and Pure Storage is seen as the big brother of this new pack of challengers. In the latest Gartner Magic Quadrant of June 2015 (see below), Pure Storage is the leader of the pack.
This imminent Pure Storage IPO is watched closely as we wait with bated breath. Will Pure Storage succeed or will it go the way of VMEM and FIO?
Pure Storage is not the first high profile All Flash storage vendor who has filed for IPO. The early ones, FusionIO (Stock Ticker: FIO) and Violin Memory (Stock Ticker: VMEM) failed miserably. FusionIO was acquired by SanDisk in June 2014 while VMEM stock price is now languishing at USD1.99 as of August 21 2015. VMEM IPO price opened below USD8.00 in September 2014. If we dissect the VMEM’s IPO handling, and compare that with Pure Storage’s upcoming debut in public offering, there are some similarities and there are also some differences.
First of all, at the time of their IPO, VMEM was burning cash like crazy. They raised a total of USD186 million over 3 years, and posted losses in all of those 3 years. Pure Storage had six rounds of funding totaled almost half a billion dollars. And Pure Storage is burning cash like crazy. In their last S-1 filing for fiscal year 2015, they posted a loss of USD183.2 million while sales went up to USD174.5 million. A screenshot of the Pure Storage S-1 income statement is shown below.
Pure Storage IPO filing is further dented when Gartner came out last week explaining that they “might” have wildly estimated the market shares numbers, including that of Pure Storage. Pure Storage has chosen to keep mum so far about Gartner’s apology and let the inaccurate numbers continue as they are. The Register caught on and came up with some unsupported conclusion that Pure Storage is 3rd in the All Flash vendor market share, not what most of us have been anticipating. The competitors jumped at the opportunity, injecting FUDs that once IPOed, Pure Storage “actual” numbers will revealed. Last week’s incidents have added some uncertainties to Pure Storage’s IPO filing.
The market for All Flash storage has certainly changed in the past 2 years. There has been a significant momentum building up to the All Flash storage array segment. The market has already understood in a brief period of time, the power Flash Storage brings to the table. It has become a game changer, a disruptor to the moribund storage networking industry. And that pent-up mix of excitement, hype, panacea-like an anticipation is waiting to explode. And Pure Storage is looked upon as the cork that is about to pop from the shaken champagne bottle. Unlike VMEM and FIO, the All Flash market is ripe for the bull run.
Next, Pure Storage has quadrupled its sales, according to the S-1 filing, while operating costs have doubled. If they continue to keep up the momentum and energy, it is likely that they will break even with the next 2-3 years. No company in the storage networking industry in 2013-2014 has enjoyed triple digit growth rate like Pure Storage. In 2013, they made USD6.1 million in revenues. That jumped to USD42.7 million in 2014. Their last call for 2015 was USD174.5 million. Their numbers are impressive.
Moreover, there must be something about Pure Storage that is pulling in the high profile big wigs like a magnet. Jonathan Martin joined from EMC as Chief Marketing Officer. They got Tim Rithers from Google last year. Mr. “Flash Ray”, Brian Palowski joined from NetApp as Chief Architect. And there were plenty of others too. The investors should have the confidence in Pure Storage’s IPO.
The storage networking industry needs to see this IPO succeed. “Big Brother” Pure Storage’s success will have far reaching effect and will give others the opportunity to file their IPO as well. SolidFire, Kaminario are just a few names on my radar for All Flash arrays. Next up will be the Hyper-Converged guys like Nutanix and Simplivity. We believe Pure Storage will do extremely well.