The Real Deal on Cyber Monday

I don’t know about you, but I didn’t do much shopping over the “Black Friday” weekend, and I don’t plan on doing any today during “Cyber Monday”, either. It’s not that I’m a scrooge (although I am sometimes told that I inherited my father’s penchant for frugality); I just don’t like the idea of someone else trying to tell me what I should be doing, and when. 

I also think it’s kind of ridiculous that the stock market places so much emphasis on this very short window of time to make significant judgments about what a company is worth. Yes, there are certain retail businesses that generate a disproportionate amount of their annual revenue in the fourth quarter of every year, and to punish those that fail to perform well during this critical period is understandable.

But for all other stocks, a far more valuable exercise is to objectively determine to what extent they are fairly valued relative to their performance over the entire year. For example, whether or not Apple sells a certain number of its newest iPhone over the next three weeks is not nearly as important as whether or not Apple is correct in identifying which product lines to emphasize in the coming year, and which to abandon.

Right now the stock market is trying to figure out exactly what the future impact will be from things such as the cessation of Quantitative Easing, the price of oil dropping much more quickly and steeply than anticipated, and how successful our allies in Europe will be in shoring up their economies by mimicking some of the monetary policy that has apparently worked so well here in the U.S.

Those are issues that far outweigh whatever gizmo is flying off the shelves this week. And more often than not, last year’s “hot” toy is this year’s contribution to the local landfill so in the long run it really doesn’t make much difference anyway. My advice: In the stock market, as in holiday shopping, resist the temptation to join the masses. You may not get that temporary feeling of euphoria that accompanies the realization that you just scored the last pet rock in the store, but you will feel much better a year later when your portfolio is beating the market while your neighbor drives off to the landfill to make room for more junk.

And speaking of quality companies, Rob DeFrancesco explains below why STI Next Wave portfolio holding Nimble Storage is doing so well. It is companies like this that will carry your portfolio to greater heights over the long run, so stock up on it while it is still on sale. Now that’s a Cyber Monday purchase even my father would feel good about!

NASDAQ Composite Index:                                                                     

Friday, November 28 = 4,791.63                                         

Year to Date = + 15.7%                                     

Trailing 7 Days = + 0.9%                                   

Trailing 4 Weeks = + 3.8%

Next Wave Portfolio Update—Nimble Storage Delivers Strong Quarterly Results

By Rob DeFrancesco

It was another excellent quarter at Nimble Storage (NMBL): Revenue in fiscal Q3 (Oct.) jumped 77% to $59.1 million, topping the consensus estimate of $57.7 million and the high end of the guidance range of $56 million to $58 million. Gross margin rose 70 basis points year over year to 67.1%.

Looking ahead, Nimble sees fiscal Q4 (Jan.) revenue of $65 million to $67 million, above the consensus estimate of $64.3 million.

It’s clear that organizations are being won over by Nimble’s Adaptive Flash platform (made up of its CASL file system and InfoSight cloud-based management) because of the substantially lower cost of capacity and performance compared with traditional disk arrays and other newer alternatives (hybrid flash and disk arrays or even all-flash arrays); flexible scaling; better application data protection; and much simpler manageability.

Four broad positive trends continue to play out for Nimble, led by new customer acquisition, as the company added 568 accounts in FQ3, bringing the installed base to 4,300+, more than double the year-ago level. The channel remains a significant driver of new customer wins; the number of unique partner account executives who closed deals in FQ3 advanced 79% from the year-ago level.

The average new customer transaction size was up double digits on a sequential basis. In addition, there was a “sizable increase” in the number of deals over $100,000, and this segment represented a record in terms of overall bookings.

The deals are getting larger because Nimble’s new CS700 high-end platform (introduced in fiscal Q2) allows the company to better compete when it comes to more performance-intensive and high capacity deployments against all-flash arrays and traditional modular storage arrays.

The second main growth trend—sales into Global 5000 enterprises and cloud service providers—hit a record level. Combined bookings from these two segments in FQ3 reached an all-time high as a portion of total bookings.

Nimble now has 260 Global 5000 customers, up from 229 in FQ2 and 183 at the end of fiscal 2014. At the very high end of this group, Nimble counts 15 of the Global 100 as customers.

On the cloud side, there are now 415 customers (including a large number of software-as-a-service companies and infrastructure service providers), vs. 342 in FQ2 and 247 at the end of fiscal 2014. Nimble’s new Storage on Demand pricing model allows service providers to secure storage as a utility; the largest deal in FQ3 involved a service provider deploying more than a petabyte of storage using this new model.

International expansion, the third primary positive trend, continues at a strong pace, with bookings more than doubling from the year-ago level, led by solid performances in the U.K., Australia and Japan. International revenue in the latest quarter accounted for 20% of total revenue. Nimble has built a significant base of reference customers across various regions thanks to investments made over the past several quarters to expand international distribution and channel relationships; its products are now sold in 48 countries.

The fourth trend—additional workloads deployed by customers already on the platform—remains steady, with initial deployments usually resulting in a doubling of the spend within eight quarters after the first purchase.

Nimble in FQ3 took the next major step in its long-term growth plan when it added Fibre Channel functionality to its platform. Faster and more flexible than the iSCSI protocol, Fibre Channel is increasingly favored to connect servers and clustered storage in storage area networks (SANs).

With Fibre Channel, Nimble expands its total addressable market by 4x (going to $20 billion from $5 billion), as the company will be able to go up against established storage players (mainly EMC and NetApp) in competitive bake-offs involving much larger enterprise deployments.

Nimble has hundreds of channel partners trained to sell its Fibre Channel SAN solution. Initial feedback has been positive: there were 40 Fibre Channel beta deployments, with several of these (in the double digits) already signing on as customers.

While Fibre Channel will be a key sales tool for winning new accounts, Nimble can also sell this new offering into its installed base; it’s estimated that a quarter to a third of all current customers are candidates for the solution.

A big positive when it comes to Fibre Channel is the average selling price (ASP), which can be as much as 50% higher than the iSCSI ASP. Going forward, Fibre Channel transactions will help drive up Nimble’s overall deal sizes.