Nutanix and Pure Storage both identified revenue target issues in their most recent fiscal quarters; Pure with actual revenues and Nutanix with forecast revenues – and they have no-one to blame but themselves.
Nutanix revenues in Q2 fy2020 were $335.4m, up 17 per cent year-on-year, with a loss of $122.8m, near double the $62.6m loss a year ago. Next quarter’s revenue guidance is $290m -$300m.
This represents 1.9 per cent growth at the $295m mid-point – far less than Nutanix’s usual growth rate.
The main reason for the forecast shortfall is that Nutanix switched spending from lead generation to engineering and product development a couple of quarters ago. It thought it would enjoy continued lead-generation efficiencies.
CEO Dheeraj Pandey said in the earnings call: “We recently identified some imbalances in our lead generation spending that were beginning to impact our sales pipeline. We recognised these imbalances in Q2 and have adjusted our lead generation spend accordingly. Despite these, these actions will take some time to take effect and therefore our Q3 guidance reflects the short-term impact of these imbalances.”
That was compounded by a shortage of sales reps in the first half of the fiscal year, CFO Duston Williams said.
A third problem was sales execution in the USA. The company aims to address this by promoting Chris Kaddaras, current head of EMEA sales, to lead both the Americas and EMEA sales organisations, Pandey said. Kaddaras has led Nutanix’s “EMEA sales engine to tremendous growth over the past 2.5 years turning around the business that was initially challenged and we expect that he will bring the same execution excellence to North America.”
Pure’s Q4 fy2019 revenues were $422.2m, up 24 per cent y-o-y, which looks heathy enough but undershoots revenues expectations of$442m. There was a loss of $25.7m. Full year revenues were $1.36bn, up 33 per cent y-o-y.
Unfortunately Pure had guided analysts to expect $1.376bn- $1.384bn so that overshadowed the 33 per cent growth.
The inability of a contract manufacturer to build enough product was the main reason for the shortfall. Also, more customers than expected took out ES2 subscription deals instead of buying perpetual licenses. Pure wants them to do that but miscalculated the adoption rate.
Nutanix and Pure say their problems are short-term and will resume growth at historical rates. Nutanix’s sales pipeline will take two quarters to fix. Pure should resolve its product ship issues more quickly.