By Jonathan Vanian
February 24, 2018

After 11 years as a private company, Dropbox publicly filed for an IPO on Friday.

The online storage and workplace software company’s debut on Wall Street would be one of the most highly anticipated in the tech industry in recent years because of its $10 billion private valuation. When Dropbox first debuted, it became a hit with consumers who used it’s free, online service to store their photos, music, and movies. But as Dropbox matured over the years, it shifted its focus to business customers, and has since debuted paid versions of its online storage service as well as work collaboration software intended to make it more attractive to companies.

In January, Dropbox confidentially filed for an IPO. And on Friday, the company made the paperwork public, revealing details about its financial performance, it’s internal tech infrastructure, and plans to expand.

Here’s some interesting takeaways from the filing:

1. Sales are growing while losses are shrinking

Like many recent tech companies to IPO, Dropbox is unprofitable. That said, each year its sales have been growing while its losses shrink.

In 2017, the company had $1.1 billion in sales, a 31% increase from the $844.8 million it logged the previous year. That same year, Dropbox lost $111.7 million, a 47% less than the $305.0 million it lost in 2016.

About $576 million of Dropbox’s 2017 revenue came from the U.S., with $531 million coming from other countries. Dropbox said that no one country other than the U.S. accounts for over 10% of its overall sales.

The company also said that it has 500 million registered users around the world, with 11 million of those paying for additional features like security and management tools. The company’s core corporate software product Dropbox Business now has 300,000 users, the filing notes. In 2016, Dropbox said it had 500 million users and 150,000 Dropbox Business users, so while overall user growth is stagnant, more companies are paying for its product.

2. Stiff competition

Because Dropbox plays in different markets like cloud storage and workplace software, it faces tough competition from some of the biggest companies like Amazon, Apple, Google, and Microsoft. Dropbox said in its filing that because these companies have bigger budgets, Dropbox will be under pressure to keep the price of its service in-line with competing services. If those rivals continue lowering their prices, Dropbox will likely have to follow to have any hope of winning customers.

Besides it tech giant challengers, Dropbox also said that smaller companies like work software companies Atlassian and Box are also a threat as well as unnamed private companies.

3. Dropbox is happy to operate its own corporate servers

During its early years, Dropbox ran its entire operation on Amazon’s cloud computing service. But more recently it has moved much of its infrastructure off AWS to cut down on costs. The company said that in 2016, it was able to shrink its cost of revenue by $35.1 million as part of its AWS migration, which it refers to as “Infrastructure Optimization.” As tech publication GeekWire notes, the data center move help saved Dropbox about $75 million over a two-year period.

One interesting tidbit Dropbox notes is that when it first started moving its corporate data from AWS to its own data center servers, it had to duplicate the data of its customers so that their data was stored in both AWS and Dropbox computers. Dropbox doesn’t say why, but it’s likely because it didn’t want to create any hiccups for customers using Dropbox’s service during the move. Dropbox acknowledged that it had to pay more money to maintain all that extra copied data, but it’s since “reduced this practice” over the years.

4. Expect Dropbox to hire a lot of salespeople

For much of its life, Dropbox said its product has spread by word-of-mouth. Therefore, the company didn’t need to hire a lot of sales and marketing staff. Now more mature, it’s considering hiring more salespeople to better sell its products to large companies with which it acknowledged that is has limited experience in terms of direct sales. It won’t come cheap.

5. Dropbox and Hewlett Packard Enterprise are very good friends.

It shouldn’t be a surprise that Dropbox and tech giant Hewlett Packard Enterprise are cozy with each other considering that former HPE CEO Meg Whitman is on Dropbox’s board. Still, the company details some of its financial ties to HPE in the filing that haven’t been previously disclosed and were likely related to Dropbox’s migration from AWS, which HPE helped out with.

For instance, Dropbox paid HPE $81.7 million in 2017 for servers, services, and a “multi-year subscription agreement for access to the Dropbox platform,” which likely refers to a reselling arrangement between HPE and Dropbox.

In 2016, Dropbox paid HPE $79.7 million and $10.9 million in the previous year.


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