Hortonworks goes public , sticker HDP (Hadoop)

A few weeks ago, I wrote an entry trying to answer this question Why Forbes tweets old news on Cloudera's valuation?

Why did Forbes tweet eight month old news?  (that Cloudera is valued at $4.1 billion) Here are some speculations

1. Cloudera valuation is not proven by market quotes an IPO did not take place yet.
2. Cloudera competitor  - Hortonworks Inc   - valued at 1,8 billions -  is rumored that filed to go Public in November 2014.
3. Another smaller competitor, MapR also announced its intention to go public next year in 2015 (which is only 10 days from now)
4. All these companies bank on Hadoop. Hadoop, which like Spark (promoted by Databricks) are not user friendly for non-developers. Sure they are excellent tools for big data, see Hadoop 101 However being hard to use is an issue.

Hortonworks people celebrating their IPO

 Hortonworks (HDP it's their symbol) opened at $16.00  on December 12 and today January 31, 2014 at 3:40 p.m. EST the quote is $27.55, The total valuation is $1,14 billion much lower than Hortonworks  earlier statement that the company is valued at $1.8 M. HDP lost money, lot's of money, $87 million with sales of only $33 M for 9 month in their fiscal year.

Andrew Burst from Gigaom, writes:

In the run-up to the IPO, some criticism of it emerged, based (understandably) on the company’s startup status and current lack of profitability. Revenues may be substantial, but if costs exceed Hortonworks, you can’t blame people for being skeptical around its shares.

Suffice it to say, there are plenty of companies in the data sphere whose business model seems to be all about the exit. These companies are less built to be profitable than to be bought by profitable companies that don’t feel like building competing products themselves. That premise feels non-compliant with the laws of business gravity I learned over my own career, but it does at least follow a certain logic. And Hortonworks’ pre-profit IPO doesn’t seem any more deviant.

My take

Hortonworks was always the underdog behind Cloudera, a company that claims revenues and a number of customers  three times as big as HDP.

The word of mouth  on the Valley says Cloudera reputation is that of "nice people to do business with" as the public image, while HDP appeared as uncouth obsessed runner-ups .

Cloudera Halloween party.

Subjective gossip aside, among Hortonworks investors, Larry Fink from BlackRock stands out. His firm  has almost four trillion dollars under management. Wall Street is not run by Institutions, it is run by individual Kings who create companies unable to exist or remain successful without them at the helm.

I don't know his exact role in HDP IPOs - time will tell - but he definitely played a role. His influence outsmarted Cloudera, who now have to catch up.

HDP (and New Relic) IPOs unforeseen success s show how thirsty the investors are for high tech stocks. The recent cyber-attacks are a blessing for the high tech bonanzas. I doubt 99% of the buyers of HDP stock know what Hadoop does.

Ironically, the name Hadoop was coined by Doug Cutting, now Cloudera Chief Architect and formerly at Yahoo!. Hadoop was his son toy elephant. Yet HortonWorks stole the sicker name: HDP

Are we creating a Hadoop bubble?

By the time three or four companies will go public, built on services for HADOOP open source software , what is going to happen with the share price?

Hadoop is just a product to build solutions, What customers need are solutions. IMHO the winner will be the the company which offers solutions anyone can understand. Cloudera offerings on their web site are for geeks, not for investors and not for mainstream customers. See for example their product comparison

This offer of tangible solutions is the best anti-bubble vaccination. Read Note 1 on this blog entry