Nutanix Inc. (NASDAQ: NTNX) drops over 2.88% to $27.11 in pre-market trading session on Monday after receiving takeover interest, Nutanix, Inc investigated a sale. According to the Wall Street Journal, Nutanix will most likely target private equity and industry participants. Given the present market volatility and economic uncertainties, a buyer would have to pay a considerable premium over Nutanix’s market valuation of roughly $5 billion.
Nutanix has a market capitalization of more than $9 billion in September 2021, but its stock had dropped by more than a third in 2022. Nutanix has recently gained steam, surging after announcing better-than-expected results and predictions in late August.
Nutanix said fiscal fourth-quarter revenue fell 1% year on year to $385.5 million, above average analyst expectations. The firm announced a quarterly adjusted net loss of 17 cents per share, above analyst consensus. Nutanix agreed in September to seek shareholder approval for a change that would allow shareholders to vote for all board directors on an annual basis.
According to The Wall Street Journal, the San Jose, California-based corporation is in talks with private equity groups as well as technology organizations. Private equity firms have targeted software companies, particularly cybersecurity startups.
In addition, in 2020, private equity company Bain Capital invested $750 million in NTNX shares.
“As it continues to transition to a software and more SaaS (software-as-a-service) model, Nutanix provides an attractive strategic asset in hybrid-cloud infrastructure,” RBC Capital analyst Rishi Jaluria wrote in a client note. “As big IT providers want visibility into both public and on-premise expenditure, Nutanix, with its massive size, sales team, and market opportunity,” he continued.
The software from Nutanix controls network, storage, and server infrastructure in cloud computing systems. Nutanix has been shifting from selling hardware appliances to a SaaS software business.
In a study released on Friday, Barclay’s analyst Tim Long predicted a private equity acquisition. Long added that NTNX is aiming for long-term transformative reforms that are more difficult to implement as a public business that is subject to quarterly scrutiny. Being acquired by a private equity firm may provide NTNX with the ability to test its go-to-market and product strategy over a longer time horizon. Furthermore, with NTNX likely to generate positive free cash flow and operating income, the bar for a possible PE purchase is theoretically lower.
According to a report by JPMorgan analyst Pinjalim Bora, IBM is a likely acquirer. “Nutanix is now the recommended infrastructure platform for Red Hat OpenShift with IBM, and Nutanix’s complete infrastructure solution has recently been certified for the full Red Hat Ecosystem,” he stated.