Nutanix Investors See War Clouds On The Horizon As Competition Intensifies

BTIG analyst Edward Parker believes the acquisition of Nutanix Inc (NASDAQ: NTNX)-rival SimpliVity by Hewlett Packard Enterprise Co (NYSE: HPE) would intensify competition in the hyper-converged space.

Privately-held SimpliVity, second only to Nutanix in the pure-play hyper-converged market, has agreed to be acquired by HP Enterprise for $650 million in cash. Parker said the lower takeout price suggests that SimpliVity’s rapid growth rate may have slowed dramatically, which may have made its expected IPO a less viable option.

Nutanix Amid HP Enterprise's SimpliVity Deal

“While this move further validates HCI as a powerful growth trend, it also signals the likelihood of increasing competition in the field — one of the key issues behind our Neutral rating (on Nutanix),” Parker wrote in a note.

The big server vendors partner with HCI vendors like SimpliVity and Nutanix to get products to market quickly and capitalize on a high growth trend.

Though Nutanix maintains product and market leadership, the analyst noted that it would find itself in a two-front war with much larger competitors such as HPE and Dell. Since, both firms now directly own leading hyper-converged offerings, differentiation is the only option to survive in the market.

“As we have argued, core HCI will likely see commoditizing pressures, so differentiation through value-added software will be crucial in order to drive a large, high-margin business in a sustainable way,” Parker highlighted.

Meanwhile, the debate will continue over Dell’s partnership with Nutanix despite it has strong offerings via its acquisition of EMC (Private)/VMware, Inc. (NYSE: VMW).

At last check, shares of Nutanix fell 3.73 percent to $28.93.