Neuralytix Believes HPE Buying Nimble Bad Decision

On March 7, 2017, Hewlett-Packard Enterprise (HPE) announced that it would acquire Nimble Storage and its Just Another Storage System (JASS) for a market valuation of over $1 billion.

While this acquisition further proves Neuralytix, Inc.‘s prediction that 2017 is a year of massive consolidation in the infrastructure market, it is also further proof of HPE’s desperation and devolution.

The timing of the acquisition is significant. It has been roughly 10 years since Nimble’s inception, and early investors (especially VCs) generally expect a full exit from its investment within a ten year horizon.

Neuralytix has been critical of Nimble from the start.

We consider Nimble Storage’s product as a ‘me too’ product – meaning that, while it may be a little cheaper, a little faster, a little better at some things compared to other products on the market, fundamentally, it has little to no organic or distinct innovation other than to be a derivative product based on the available solutions in the market today.

Our opinion of Nimble Storage has not changed.

So, essentially, what HPE is buying is just another storage system (or what Neuralytix calls JASS). HPE already has a reasonable portfolio of storage solutions. Its problems are not that the products are bad, its problems are that it just is not selling enough of them.

Hewlett-Packard (before the split between the enterprise and consumer divisions) had a tag line of ‘Invent.’ Yet, HP had not invented anything much over the last 10-15 years. Buying a lackluster storage systems company is equivalent to buying a used car, slapping a new coat of paint on it, and passing it off as new. No matter what you do to it, it’s still an old model!

Recently, HPE bought SimpliVity for $650 million. Buying SimpliVity was a smart move. It brought much needed contemporary software-defined storage (SDS) and hyperconverged infrastructure (HCI) capabilities to its portfolio, but then to go and buy a traditional storage systems company is going backwards.

As for Nimble, it continues to shows that there will always be a market for cheap solutions, but it also shows that its greatest skill is to align its growth in net losses with its growth in revenue. Can HPE change this? It’s a crap shoot. On the one hand, there are a lot more salespeople at HP who can now sell Nimble, but will it turn it into a billion-dollar business? Our opinion is, not likely. If HP salespeople cannot sell what they have now, adding another competing product in their portfolio will only further confuse sales, not help them. Additionally, with the HPE overlays, headcount, overheads, etc., losses for the products will accelerate making it very difficult to get a positive return on the investment.

The suggestion that HPE purchased Nimble for its InfoSight analytics is weak. Any analytics capabilities should not be limited to a single product. So, HPE must invest dollars into expanding InfoSight analytics to its existing 3PAR and MSA platforms to make it meaningful; and, to truly have a meaningful set of analytics, HPE should really expand the scope of the analysis beyond HPE branded solutions to leading storage products in the industry.

Neuralytix posits that HPE would have spent less money, and need a similar timeframe to organically developed its own analytics storage software based around its existing software-defined storage solutions.

Alternatively, it could have purchased several storage analytics vendors in the market.

Overall, this is a disaster of a move by HPE. While, not on the scale of Autonomy, it is our considered opinion that it is overinvesting in a company that is not likely to see a positive return to HPE. In the end, this acquisition signals to the industry that either HPE’s sales team and/or its product portfolio is ineffectual. It also shows that HPE is not interested in investing in next generation technologies, instead, it is investing in traditional, soon to be passé products.

What HPE needs to do is figure out how to take this JASS product and turn it into a scalable platform that is software-driven, and not hardware-laden.

Read also:
Ben Woo About Nimble Storage IPO
“The solution has no market leadership other than being cost leader.”
2013.10.22 | Press Release