IPO Report: Hortonworks (HDP)

Francis Gaskins |

Hortonworks IPO, Hortonworks IPO date, Hortonworks IPO price, IPOs this week, stocks to buy now, small-cap stocksHortonworks (HDP) mission is to establish Hadoop as the foundational technology of the modern enterprise data architecture. The company is based in Palo Alto, CA.

Nine other companies are scheduled for the week of Dec. 8, 2014. The full IPO calendar is available at IPOpremium.

Manager, Joint-managers: Goldman Sachs, Credit Suisse, RBC Capital Markets

Co-managers: Pacific Crest Securities, Wells Fargo Securities, Blackstone Capital Markets

HDP scheduled a $78 million IPO with a market capitalization of $538 million at a price range midpoint of $13 for Friday, Dec. 12, 2014 on Nasdaq. SEC Documents

Hortonworks IPO Report

Overview

HDP’s mission is to establish Hadoop as the foundational technology of the modern enterprise data architecture.

HDP seeks to advance the market adoption of Hadoop and provide enterprises with a new data management solution that enables them to harness the power of big data to transform their businesses through more effective and efficient management of their valuable data assets.

Valuation
Glossary

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

annualizing Sept 9 mos

         

Hortonworks (HDP)

$538

12.1

-4.6

3.4

3.4

14%

             

Conclusion

Neutral plus

Rev +109%; 34% gross profit

Loss rate is -260%; never made money

P/E of -4.6, indicating large cash burn vs market cap

Accumulated deficit of -$181mm

Price-to-book of 3.4

Price-to-sales of 12.1

Business

HDP’s mission is to establish Hadoop as the foundational technology of the modern enterprise data architecture.

HDP seeks to advance the market adoption of Hadoop and provide enterprises with a new data management solution that enables them to harness the power of big data to transform their businesses through more effective and efficient management of their valuable data assets.

Market growth, 58% compound annual growth rate

Tom Reilly, CEO of Cloudera, a Hortonworks competitor, said this market is experiencing a 58 percent compound annual growth rate, citing Allied Market Research as the source. He added that 451 Research has published similar growth rates.

“Regardless of the source, the data-related segments (data management and data storage) of enterprise software comprise a multi-billion dollar market rapidly growing, driven by analytical workload expansion,” he told CMSWire.

John Schroeder, CEO of MapR, the remaining independent commercial Hadoop distro provider, told CMSWIre at the time of the S-1 unveiling, that the Hortonworks filing spoke well of the Hadoop market overall. “It’s proof positive that the market is maturing and good for investment,” he said.
Source:  CMS Wire

Hadoop cluster

A Hadoop cluster combines commodity servers with local storage and an open source software distribution to create a reliable distributed compute and storage platform for large data sets scalable up to PBs, with thousands of servers or nodes.

HDP’s solution is an enterprise-grade data management platform built on a unique distribution of Apache Hadoop and powered by YARN. HDP continuously drives innovation in the Apache community with a mission to further Hadoop’s development for enterprises of all types and sizes.

HDP’s platform deeply integrates with key data center technologies to enable best-of-breed data architectures and enables its customers to collect, store, process and analyze increasing amounts of existing and new data types in a way that augments rather than replaces their existing data center infrastructure.

Differentiated approach

HDP employs a differentiated approach in that it is committed to serving the Apache Software Foundation open source ecosystem and to sharing all of its product developments with the open source community. HDP supports the community for open source Hadoop, and employ a large number of core committers to the various Enterprise Grade Hadoop projects.

HDP believes that keeping its business model free from architecture design conflicts that could limit the ultimate success of its customers in leveraging the benefits of Hadoop at scale is a significant competitive advantage.

Recognized as a leader

HDP is recognized as a leader in Hadoop by Forrester Research based on the strengths of its current offering and its strategy, and HDP has invested to enhance its position through the introduction of its Enterprise Grade Hadoop platform.

HDP’s Enterprise Grade Hadoop platform addresses modern data requirements and enables enterprises to significantly increase their data under management and their business productivity with this data.

Customers

As of September 30, 2014, HDP had 233 support subscription customers (which HDP generally define as an entity with an active support subscription) and 292 total customers, including professional services customers, across a broad array of company sizes and industries.

HDP has entered into contracts to establish strategic relationships with Hewlett-Packard Company, Microsoft Corporation, Rackspace Hosting, Inc., Red Hat, Inc., SAP AG, Teradata Corporation and Yahoo! Inc. focused on tightly integrated development, marketing and support strategies to maximize the success of HDP’s solutions.

Open source approach

Consistent with its open source approach, HDP generally makes the Hortonworks Data Platform available free of charge and derive the predominant amount of its revenue from customer fees from support subscription offerings and professional services.

History

HDP was founded in 2011 when its early senior management team, led by its current Chief Executive Officer Rob Bearden, partnered with a core team of Hadoop developers and engineers from Yahoo! with a goal of expanding upon the early technology developed by Yahoo! in Hadoop, the initial rights to which HDP obtained from Yahoo!.

During 2012 HDP launched its Enterprise Grade Hadoop platform, the Hortonworks Data Platform for which HDP provides support subscriptions and professional services.

Achieved milestones

Since founding in April 2011, HDP and partners have achieved the following significant milestones:

October 2011: Announced strategic relationship with Microsoft to deliver Hadoop-based solutions for Windows Server and Windows Azure;

February 2012: Announced joint development, support and marketing partnership with Teradata;

June 2012: Hortonworks Data Platform Version 1.0 general availability;

September 2012: Hortonworks Data Platform Version 1.1 general availability;

October 2012: Announced joint initiative with Rackspace to deliver OpenStack and Hadoop-based solutions for public and private cloud;

January 2013: Hortonworks Sandbox general availability and Hortonworks Data Platform Version 1.2 general availability;

May 2013: Hortonworks Data Platform Version 1.1 for Windows general availability (first release for Windows);

June 2013: Hortonworks Data Platform Version 1.3 general availability; Teradata Launches Teradata Portfolio for Hadoop (Teradata sells Hortonworks Data Platform in appliance, on commodity hardware, and as a subscription);

 August 2013: Hortonworks Data Platform Version 1.3 for Windows general availability;

September 2013: Announced reseller agreement with SAP;

October 2013: Hortonworks Data Platform Version 2.0 with YARN general availability (first general availability release of the Hortonworks Data Platform with YARN), announced reseller agreement with HP and Microsoft launches Windows Azure HDInsight (Azure cloud service built on Hortonworks Data Platform);

February 2014: Announced deepened strategic alliance with Red Hat to bring enterprise Apache Hadoop to the open hybrid cloud;

 April 2014: Hortonworks Data Platform Version 2.1 for both Linux and Windows general availability (simultaneous distribution of the Hortonworks Data Platform on both platforms);

May 2014: Hortonworks acquired XA Secure, a data security company. In connection with the acquisition of XA Secure, acquired developed technology with a fair value of approximately $4.0 million. On August 13, 2014, HDP contributed the developed technology to the Apache Software Foundation (ASF) and are recognizing an operating expense equal to the carrying value of the developed technology in HDP's  statement of operations at the point in time of the contribution and

June 2014: Launch of Hortonworks YARN Ready Program to accelerate independent software vendor on-boarding onto YARN.

Intellectual property

HDP’s offerings, including the Hortonworks Data Platform and Hortonworks Sandbox, are built from software components licensed to the general public under the Apache Software License and similar open source licenses.

HDP obtains many components from software developed and released by contributors to independent open source software development projects primarily at the Apache Software Foundation.

Open source licenses grant licensees broad permissions to use, copy, modify and redistribute the Hortonworks Data Platform.

As a result, open source development and licensing practices can limit the value of HDP’s software copyright assets.

Consequently, HDP’s trademarks may represent its most valuable intellectual property.

As a result, HDP actively pursues registration of its trademarks, logos, service marks and domain names in the United States and in other countries.

The duration of HDP’s trademarks registered in the U.S. generally lasts as long as HDP uses them in commerce and timely file all documents required by the United States Patent and Trademark Office to maintain such registrations.

Competition

Within the enterprise Hadoop market, HDP competes against a variety of large software and infrastructure vendors, smaller specialized companies and custom development efforts.

HDP’s principal competitors in this market include pure play Hadoop distribution vendors such as Cloudera and MapR Technologies, as well as enterprise software and infrastructure vendors that offer Hadoop distributions such as IBM, Oracle and Pivotal Software.

Within the broader big data market, an enterprise Hadoop solution may compete for workloads against traditional data warehouse solutions from large vendors such as Teradata, Oracle, Microsoft, IBM, Hewlett-Packard Company, SAP and EMC Corporation (Pivotal Software), and non-relational NoSQL databases from pure play vendors such as MongoDB Inc. and DataStax, Inc. Since enterprise

Hadoop is commonly integrated with traditional data warehouses, such as HDP’s partnerships with Teradata and Hewlett-Packard Company, and NoSQL databases, such as its partnership with DataStax, this category of vendors and solutions comprises a set of key partners who may compete with HDP in certain instances while partnering with it in others.

5% shareholders pre-IPO

Robert Bearden  6.8%

Peter Fenton 18.7%

Michelangelo Volpi  9.5%

Dividends

No dividends are planned.

Use of proceeds

HDP expects to receive $75 million from its IPO and use it for the following:

general corporate purposes including funding its growth strategies discussed.

These uses include expansion of its sales organization both directly and indirectly through its reseller and OEM partners, international expansion in North America, Western Europe and other geographies, further development and enhancement of the Hortonworks Data Platform and integration with the Hadoop ecosystem and general and administrative matters, although HDP does not currently have any specific or preliminary plans with respect to the use of proceeds for such purposes.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
HDP Hortonworks Inc. 8.44 0.06 0.72 252,918

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