Just a little more than two weeks from today, on Sept. 2, Box CEO Aaron Levie will host BoxWorks, the company’s biggest pep rally of the year. There’s a nice line-up of all-stars keynoting — Jim Collins, author of Good to Great, Disney’s Jeff Katzenberg, LinkedIn’s CEO Jeff Weiner and Aneesh Chopra, former CTO of the United States.
And then, of course, there’s Levie himself. Not only is he Inc. Magazine’s Entrepreneur of the Year, but he’s also got celebrity-like status in Silicon Valley. Never mind his Hollywood connections to the likes of Ashton Kutcher, who invested in Box, and Oscar winner Jared Leto who reportedly visited the company earlier this year.
But There Are Big Problems
What’s less likely to be out for display are Box’s miserable finances, its delayed IPO and talk of increasing competition from industry giants like Microsoft, EMC, Google, Citrix, VMWare, Amazon and fellow Sync and Share startup Dropbox.
Though you certainly don’t see Levie sweating in public, he has to be feeling the heat. Consider that one year ago analyst Forrester gave Box the pole position in the Enterprise File Sync and Share (EFSS) space, by last month Gartner tagged it as the third of four leaders in its Magic Quadrant for EFSS.
Levie would, no doubt, argue that he’s thrilled with Box’s placement, especially because it is the only “cloud-only” provider in the Leaders quadrant. And while that’s certainly an achievement, cloud-only may not be what Enterprises want at this point in time. Consider that, according to a reliable source, shortly after GE chose Box as its EFSS solution, the conglomerate’s managers got push back from some powerful users who refused to put all of their files in the cloud.
This problem is being solved by adding a second vendor’s services, which GE already uses, into the mix. But the fact that a company who wants to be on the edge couldn’t go with Box as a standalone may be proof positive that, at this point in time, a cloud-only play, regardless of how good it is, isn’t a single best solution. Especially when there are more highly rated options like EMC Syncplicity and Citrix, which are hybrid, available.
Whether Box can remain viable as a “cloud only” solution is something that would-be customers and investors will likely scrutinize.
Or maybe they’re already doing that. Especially if what Heather Sommerville of the Mercury News reported is true.
Referring to Box’s most recent round of funding in July, she indicated that at least one of Box’s newest investors is hedging its bets. She wrote:
Under the terms Box agreed to as part of a $150 million investment this month, the company must go public by July 2015 at a value of no less than $20 per share or it will be on the hook to pay penalties to investors."
Box a Leader, But Not THE Leader
But this isn’t Box’s only pressure where timing is concerned. Dropbox, which didn’t have much of a business offering until now, is beginning to catch up. (Watch for news tomorrow.) So is Microsoft. And EMC’s Syncplicity and Citrix’s ShareFile both out-ranked Box (qualifiers were “completeness of vision” and “ability to execute”) in Gartner’s Magic Quadrant that was released last month. It’s worth noting, too, that neither of these giants is sitting still. EMC Syncplicty lowered its prices and increased its storage allotments late last week.
Box’s other competitors are making strategic moves as well. Fellow MQ-dweller Accellion, which was hell-bent on private cloud-only before last week, is now available on Google Drive for Work and Microsoft’s OneDrive. Not only that, but they’ve also taken on a self-service sales strategy, which Box also uses, on their kiteworks for teams offering.
And then there’s AirWatch, which VMWare bought earlier this year. They have what is probably one of the strongest mobile plays in the industry. And it’s only recently that they started (General Manager John Marshall wanted to have the time to get the integration right) to show up VMWare’s price sheet. But now that they’re there, VMWare’s massive, red-hot sales team will be selling their wares and, Box competitor, Secure Content Locker is one of them.
With Box losing ground and spending money as quickly as investors provide it, what’s next? Waiting for the uncertainty of the stock market to lift, especially where tech shares are concerned, and then going for an IPO is one option. But, as we’ve already said, that provides even more time for competitors to add features and services and to send their well-connected sales forces out into the field.
Is Selling a Better Option Than an IPO?
Take all of that in, and you have to ask if now might not be a good time for Levie to start knocking on doors and courting potential buyers.
And don’t worry, Aaron, we’re not talking about old goats but tech leaders you probably admire, would be thrilled to keep company with, and who could serve as good, unobtrusive mentors. If they’re not calling on you, maybe you should call them. Invite them to BoxWorks …
Here’s who might consider buying Box:
Apple Wants a Bigger Enterprise Footprint
Apple is big into the mobile enterprise. According to some, it has a presence 94 per cent of Fortune 500 companies. And enabling enterprise-grade file sharing, between mobile and cloud, is what Box is all about. So adding Box to Apple’s emerging Enterprise portfolio may be a natural fit. In fact, Box has a promotion running for Samsung Galaxy S5 owners now. If it’s a success, it might serve as a case in point.
Though Apple CEO Tim Cook and his team would be unlikely to keep Box competitors out of the App Store, Box could be a default app that comes pre-loaded on iDevices. If the user experience is all that it’s made out to be, the enterprise might be an easy win.
But that’s just one synergy.
Everyone knows that Apple is big into music and film. What they might not be as aware of is that Levie does some fruitful schmoozing in Hollywood. Consider that both Ashton Kutcher and Madonna’s manager, Guy Oseary, have invested in Box. Not just that, but Levie also told the LA Times that he talked to Harrison Ford about “the cloud” at the Oscars. (Anyone else find that odd?)
That being said, an argument could be made that content-rich Apple could find some use for Box while sharing files and collaborating on content with its business partners. If they like the experience, they might want to use Box in their own businesses as well.
We could go on, but suffice it to say that Levie could probably make a decent pitch to Apple CEO Tim Cook. If Dr. Dre could get a $3.2 billion deal from him, then the Box crew could make out as well as if they had IPO’d.
If Cook Won’t Bite, There’s Jeff Bezos to Consider
The Amazon CEO and his CTO, Werner Vogels, know that Amazon Web Services (AWS) lacks(ed) an enterprise-grade file sharing solution.
Sure, they recently came up with one of their own, Zocalo, but the reasons for doing so were pretty lame --namely that “Other tools that are available are not up to par,” according to Vogels.
That’s simply not true. We’ve taken a good look at most of the “other” tools and the user experience is at least as delightful as what we see in the Zocalo preview. Price may be a differentiator, though.
If Amazon was able to buy Box and deliver it on AWS for 25 percent of the price, it would still have a cloud-only problem, but Amazon/Box would have access to a larger cloud market and be within reach of smaller companies.
And there’s not just that, the time to win EFSS customers is now and by owning Box, Amazon’s problem of being late-to-the-game disappears.
A Box Acquisition Could Fill Google Drive for Work’s Gaps
If Bezos isn’t interested, then Levie can take his top hat and cane to Google to try to woo Larry Page. The search giant finally looks serious about the enterprise and, while Google Drive for Work looks like a good deal, a Box acquisition could be an easy way to fill in some gaps and add a few bells and whistles.
Not just that, but it would give Google something else to bring to the table as it competes with Microsoft and Amazon.
A More Graceful Exit
Each of the aforementioned scenarios may be far less risky, and, potentially, just as lucrative as an IPO.
And, finally, it’s prudent to ask what happens Box even if it eventually and successfully raises the $250 million it’s looking for in an IPO. How long will it take for Levie and company to (even if it’s for good reason) blow through that?