Although both Box and Dropbox sell to customers online storage for their documents and data, Levie argues that they are two very different companies that target different kinds of customers.
He volunteered to comment to Fortune about Dropbox’s planned IPO, publicly confirmed on Friday in a regulatory filing, to help Wall Street understand the differences between the two businesses. While Box and Dropbox are “similar in some ways,” he says it’s “mostly in name” only.
“It’s his fault,” Levie joked, referring to Dropbox CEO Drew Houston giving his company a similar name two years after Box debuted in 2005. “He came after us.”
Levie praised Dropbox’s financial results, revealed for the first time in Friday filing. Dropbox’s sales are increasing year-by-year while it reduces its annual losses, albeit they were still a sizable $111.7 million in2017. From the financials, it seems they like they put together an exciting business,” said Levie, who led his still-money losing company through an IPO in 2015.
What separates his company from Dropbox, according to Levie, is that Dropbox primarily caters to consumers and small businesses instead of larger ones like Box. Instead, Dropbox mostly caters to consumers and small-to-medium sized businesses, Levie said. Indeed, Dropbox said in its filing that it has “limited experience selling directly to large organizations,” although it does count some big companies as customers like Adidas, Expedia, and News Corp.
Still, Dropbox said in its regulatory documents that it plans to hire more sales staff as a way to sell more to large companies. But Levie downplayed the notion, saying that Dropbox has failed to make much progress with big companies like banks or pharmaceutical firms after targeting those customers for years.
Levie explained that Dropbox’s difficulties with larger customers is because its product isn’t tailored for the regulatory and security requirements of big businesses. His view, of course, isn’t exactly unbiased.
In reality, many analysts say that large companies have only just begun experimenting with cloud services like online storage and that Dropbox, therefore, has time to tweak its products. Nothing is set in stone—at least not yet.
After reading Dropbox’s filing, Levie said that he expected it to have more paid users. Only 11 million customers pay for Dropbox’s premium services out of 500 million registered users. The company’s corporate version of its service Dropbox Business, counts 300,000 users, the Dropbox filing notes. Box, on the other hand, says on its website that it has 41 million users and according to it’s latest earnings, has 80,000 paying customers, which include companies like General Electric and AstraZeneca.
Levie said that Dropbox’s IPO is well timed. “I think it’s a great time to go public if you have a strong business model,” he said, citing other fast-growing businesses like Airbnb and Lyft that could benefit by going public this year.
Asked about what advice he’d give to Houston about leading his company after an IPO, Levie said to expect change. In light of that, Houston should remain focused on Dropbox’s corporate culture and core products, Levie said, while dealing with the increased demands of having public investors.
“I think there’s a lot of distraction that comes from Wall Street,” Levie said, who himself has three years dealing with it.
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Cloud storage company Box's revenue forecast for the current quarter missed Wall Street estimates amid slowing growth in paid customers in the fourth quarter.
The company's shares fell 12.7 percent to $21.00 in extended trading on Wednesday.
The rate of growth in paid customers slowed to 2,000 in the quarter, compared with 4,000 additions in the third quarter.
Box, which competes with Dropbox, Microsoft's OneDrive and Google's Drive, had 82,000 paid customers in the fourth quarter, up from 80,000 in the third quarter.
Dropbox recently filed for an initial public offering of up to $500 million.
When asked about the rival's IPO, Box Chief Executive Aaron Levie said: "I think it's really important to think about Dropbox as being in a very different market."
"... They are much more focused on consumers and small businesses whereas we are very focused on companies in the mid-market all the way up to the largest enterprises in the world," Levie told Reuters in an interview.
Analysts seemed to back up that claim.
D.A. Davidson's Rishi Jaluria said "Dropbox and Box are approaching the content collaboration market differently ... Dropbox will go public at a premium valuation to Box, which could lift Box's multiple somewhat."
The company forecast revenue for the first quarter in the range of $139 million to $140 million as per new accounting standards, below analysts' estimates of $144.3 million.
Box said it expects an adjusted loss per share for the first quarter to be in the range of 8 cents to 9 cents. Analysts on average were expecting a loss of 8 cents.
The company's net loss narrowed to $32.7 million, or 24 cents per share, in the quarter ended Jan. 31 from $36.9 million, or 28 cents per share, a year earlier.
On an adjusted basis, the loss was 6 cents per share. Analysts on average had expected a loss of 8 cents per share, according to Thomson Reuters I/B/E/S.
Redwood City, California-based Box said its revenue rose 24.3 percent to $136.7 million, in line with Wall Street estimates.
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