These should be dark days for Box, the online storage and collaboration service for businesses. Public for a year, Box’s shares are worth less than $10 each, down from a high of more than $24. Despite being more than a decade old, Box loses money like a startup. And the Wall Street Journal, relying on the it-makes-sense theory of news reporting, suggested last week that Box and others will be scooped up by bigger competitors eager to capitalize on their diminished valuations.
For all this, Aaron Levie, Box’s recently-turned-30-years-old CEO, couldn’t be sunnier. Yes, it takes time for new customers to become profitable, he says. It took 18 months, for example, to sell Box services to General Electric. “That’s unprofitable,” Levie says. “Then it’s a multi-million-dollar deal.” GE has 150,000 Box users and is highly unlikely to leave Box any time soon. In fact, the cloud software company claims a 120% retention rate, meaning that few customers leave and many add users over time.
Box is an anomaly among startups in the “unicorn” era. From its founding in 2005 until 2007 it was focused on consumer and business, but in 2007 it pivoted to only enterprise. Users will find Box similar to Google Drive, a place to store and share files on the Internet. Behind the scenes, Box manages sophisticated tasks like encryption keys, complicated workflows, and regulatory compliance. Levie says businesses are willing to pay for such tools, compared with more fickle consumers. “If we can change how drug companies develop their products, that’s equally exciting to sharing photos,” he says, an unsubtle dig at competitor Dropbox. Its still-private competitor has toggled between consumer and business approaches, and recently killed a much ballyhooed consumer photo feature.
Business adoption isn’t enough, however. Levie believes his company needs to become a “platform of record” for customers who are attempting to go digital. This means opening its software to customers who can then offer Box services to their customers.
There’s no guarantee Box can pull off this audacious strategy, a bid to be as important a software provider in the future as Oracle is today. “That’s precisely why we decided to raise hundreds of millions of dollars,” Levie says. “To go big.”
BITS AND BYTES
Twitter reorg rattles investors. The social media company’s stock tumbled 6% on Monday to $16.51, after CEO Jack Dorsey confirmed four high-level executive departures. Uncertainty over future product direction, now in the hands of Oracle alumnus Adam Messinger, isn’t helping matters nor is speculation over Dorsey’s plans for Twitter’s board. (Wall Street Journal, Fortune)
Arista Networks accuses Cisco of antitrust suit. It has been more than a year since Cisco sued its smaller networking technology rival for patent and copyright infringement. Arista’s counterclaim alleges that Cisco used its market dominance to encourage competitors to use certain “industry standard” features, only asserting its copyrights after they were locked into using them. The U.S. International Trade Commission is set to rule on Cisco’s request for an import ban on Arista products later this week. The new filing complicates matters.(Wall Street Journal)
Instagram could soon be a $3 billion business. The photo-sharing app had no clear revenue stream when Facebook acquired it for $1 billion in 2012. The advertising program it launched last September, however, is growing quickly and could contribute $3.2 billion this year, according to projections by Credit Suisse. Analysts are hoping for more details in Facebook’s fourth-quarter financial results, due out Wednesday afternoon. (Fortune)
VMware lays off 5% of workforce. The company, which specializes in data center virtualization software, is majority-owned by storage company EMC. Its expenses are under closer scrutiny ahead of EMC’s acquisition by Dell in a transaction valued at $67 billion. You can expect more details as part of VMware’s next quarterly earnings report, scheduled for later today. (Fortune)
Sony spends $212 million on smarter sensors. The Japanese electronics company is buying Israel’s Altair Semiconductor, a move that will expand Sony’s ability to provide components for wearable gadgets and the Internet of things. Altair is a specialist in low-power wireless communication components that use the LTE mobile broadband standard. One sector that this union will impact quickly: connected cars. (Fortune)
Sprint pays customers to watch ads. The wireless carrier is experimenting with a program, called Boost Dealz, that gives prepaid customers a $5 discount for watching mobile advertisements. For now, the initiative is focused only on Android smartphones. Sprint and its wireless cohorts are seeking to diversify revenue amid slow subscriber growth. (Wall Street Journal, Reuters)
Artificial intelligence pioneer Marvin Minsky dies. The longtime educator, who was 88, co-founded the highly regarded research laboratory at the Massachusetts Institute of Technology back in 1959. He is credited with building the first neural network learning machine eight years before that time. Minksky was awarded computer science’s prestigious Turing Award in 1970. (New York Times)
Ben Carson would create federal cybersecurity agency. If elected, the presidential hopeful plans to assemble an organization to combat hacking attacks and data breaches. He wants the government’s current agencies to share more information about effective defenses and data handling measures. (Fortune)
Why Amazon’s cloud numbers may be the only ones that count. Nothing is, er, cloudier, than the cloud sales, revenue, and usage numbers put out by information technology giants. Aside from Amazon Web Services—which derives almost all of its money from the sale or rental of computing power, networking and storage services—all of these figures should be carefully scrutinized, or perhaps even disregarded, analysts say.
It’s not that Amazon is a paragon of transparency: It just started breaking out AWS revenue and sales from its overall results last April. But since virtually all of the AWS business is from these rentals and it launched its first cloud service in 2006, its sales numbers don’t include a lot of legacy hardware and software products. That makes its numbers reasonably legitimate. But AWS’s tremendous success—as of last year it ran 10 times more computing capacity than the next 14 competitors combined, according to Gartner estimates—has forced other, older IT companies such as IBM, Microsoft and Oracle to paint their cloud business in the best possible light. As Fortune‘s Barb Darrow reports, sometimes the data strains credulity. (Fortune)
IN CASE YOU MISSED IT
5 tough questions for Apple CEO Tim Cook by Philip Elmer-DeWitt
Amazon customer support has gaping security hole by Robert Hackett
Facebook’s Mark Zuckerberg is back at work by Kia Kokalitcheva
Exclusive: Qualcomm Ventures boss heads to Microsoft by Dan Primack
Video is coming to Spotify this week by Kia Kokalitcheva
Cloud financials upstart Adaptive Insights names new CFO
by Heather Clancy
This consumer wearable is powering next-gen prosthetics
by David Z. Morris
Want smarter apps? Microsoft has a toolkit for that by Barb Darrow
Facebook’s new European data center will be in Ireland by Claire Zillman
ONE MORE THING
Very few CEOs use social media. Many still see it as a distraction. Among the most active mavericks: Salesforce’s leader Marc Benioff. (Fortune)