Cloudera sets its sights on $1bn revenues after Hortonworks slurp gave Wall Street the willies
CMO talks post-merger relationships, open-source spats
Interview Cloudera said it plans to become the darling of Wall Street in 18 months, in part by breaking into the $1bn turnover club. This promise comes a week after the company reported widening losses and sales that missed analysts forecasts, sending its share price down by almost a fifth.
Speaking to The Register at the DataWorks Summit in Barcelona this week, CMO Mick Hollison admitted some elements of the recent merger with Hortonworks had been bumpier than others, and that the new firm wasn't where "any of us would like it to be" in the marketplace.
But his team plans to turn it around, saying that, as well as delivering on the company's product roadmap, his ambitions for the year are to "begin to have the kind of financial metrics that Wall Street would more greatly appreciate".
Cloudera last Thursday reported its first set of results since merging with Hortonworks, just about doubling both its Q4 net loss, to $85.5m, and operating loss, to $86.96m, year on year. Analysts and investors were disappointed, and its stock price tumbled from $14.61 to $11.71. The price at the time of writing is $11.46.
Revenues were $144.5m for the quarter and $479.94m for the year, but Hollison said the plan was for the firm to be a $1bn company in 18 months, growing at 20 per cent-plus on the top line and with 15 per cent operating cash flow margins.
"If we've accomplished those things, we'll be one of only nine software vendors that have a financial outlook that looks like that," he said, including Service Now and Splunk in the list.
"You look at the multiples those companies command in the marketplace versus the comparable multiple that Cloudera's commanding, which is not where any of us would like for it to be," he said. "That looks like success and the financial metrics Wall Street would appreciate, and will in turn reward us with the share price."
Hollison argued the most recent results were full of "complexities" due to the merger.
"We had two completely different accounting technologies, and when we melded those together, it meant we decided not to recognise a lot of revenue that we might have recognised historically, in order to get all on one accounting system," he said.
"That led to a lot of investors who didn't necessarily do all of their homework... to have a reaction to the end of the quarterly earnings statement [that] was probably outsized."
'There are only so many places in the C-suite'
Another issue for any company merger is bringing two disparate sets of people together; melding the upper echelons is not straightforward, and a number of the former star DataWorks speakers, like Hortonworks CTO Scott Gnau, were notable by their absence.
A number of those executives have been fighting a long hard battle at Hortonworks, against a bigger, more well-funded company in Cloudera
"A lot of those people decided to pursue other interests after the merger," said Hollison. "I'll be candid with you, I think we'd love to have had a few more of those folks decide to stay on.
"I think a lot of those executives have been fighting a long hard battle at Hortonworks, against a bigger, more well-funded company in Cloudera, and a lot of them honestly were just ready to take a breather."
However, the chief marketing officer – who was the most senior exec in attendance at DataWorks this year – added that when companies merge, "the further you go up to the top, the less seats there are".
He did emphasise that some legacy Hortonworks staff were at the event, and pointed out Hortonworks co-founder and chief product officer Arun Murthy had retained his position in the new biz.
"You'll see him at a few less events than you would have traditionally seen Scott or Arun, because he needs to deliver on [new release] Cloudera Data Platform, and I want him back in California making sure the engineers get that done."
It was apparently less complicated to bring other parts of the business together. Hollison admitted the sales teams in particular had initially found it hard to switch from combatant to colleague.
"They've been in hard-fought competition for so long," he said. "A lot had been battling it out in specific geographies."
The solution, it seemed, was the traditional social lubricant. "Once a bunch of sales people start drinking together..." Hollison said. "They recognised there was a good bloke on the other side of the table."
He painted the merger as having been a smoother ride for engineers, as they were already cooperating in the open-source community; the two firms shared about 70 per cent of their code, Hollison estimated.
'We're committed to open source, but we're also a for-profit business'
During his keynote, Hollison told attendees – to a wave of applause – that the new Cloudera would be "100 per cent open source", as was the case for Hortonworks, while old Cloudera had an open core. But when asked to clarify, the exec told The Reg the exact details are yet to be worked out.
"That was a statement of intent," he said. "We've not magically done all the work in the past few weeks and it's all here... but it will be here very shortly."
The core platform and all the components of CDP will definitely be 100 per cent open source, he said, but the top brass have yet to decide what licensing mechanisms to use. "We're committed to open source, but we're a for-profit business and have to protect our shareholders."
The topic is particularly heated at the moment – a number of companies have updated their terms in a bid to stop public cloud companies ripping off their products.
I don't think we want to go in that back and forth
However, Hollison indicated Cloudera wouldn't be getting into the sorts of public wranglings MongoDB has with AWS: soon after the database biz rejigged licensing agreements, AWS hit back with its own Mongo-compatible document database.
"Yeah, tit for tat," Hollison said when asked about the goings-on. "I don't think that we want to particularly be in that game, I don't think we want to go in that back and forth."
The Clouderan took a less hardline approach than those of other open-source companies, focusing more on the partnerships that his firm needs to have with the public cloud vendors to survive.
"I'm not trying to be cute with my language. Genuinely they [AWS] are a very important partner to us, as of course is Microsoft and increasingly Google," he said. "These companies have every right to deliver offerings on their clouds as they wish, and we have a right to protect ourselves and compete vigorously."
And it is the three major public cloud vendors that Hollison names as the company's main competition, since it has sucked up its biggest rival. Below that, he said Cloudera would most often compete against single-function vendors such as Snowflake, Databricks and Confluent.
"For us, our competitive moat is built around the fact that we are multi-function, which is very hard for single-function vendors – they have to partner to add functionality – and that we are multi and hybrid cloud," he said.
"The house vendors have never been able successfully compete in the multi-cloud world, and almost every enterprise customer isn't going to be on just one public cloud provider – they don't want to find themselves in [a situation of] a new-world mainframe." ®
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