The Cloud

Data Storage Firm Needs to Show IPO Investors It Can Cut Costs

Box had delayed an earlier IPO that had been filed last March partly because of doubt about its big sales and marketing spend.
Katie Kuehner-HebertJanuary 9, 2015

On a road show, preparing for a second time to go public, Box, an online storage company, will need to demonstrate to would-be investors that “it has reined in costs without sacrificing too much growth,” the Wall Street Journal reported Friday.

Box CEO Aaron Levie in 2007.

Box CEO Aaron Levie in 2007.

The Palo Alto, Calif. company said it intended to register up to 14.4 million shares, at an expected price between $11 and $13 a share, with the hopes of raising up to $186.9 million from an initial public offering, according to the story. The company said it hopes to net roughly $134.3 million, to be used for general purposes.

Box, founded in 2005, had delayed an earlier IPO that had been filed last March, “amid weakening demand for business-software stocks and skepticism stemming from the company’s high rate of spending on sales and marketing,”  WSJ wrote.

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According to the WSJ article, Box spent 97 cents on sales and marketing for each dollar of revenue it made in the three months ended Oct. 31, down from a ratio of $1.38 to every dollar of revenue when it first filed for an IPO in March of last year. The company’s loss narrowed to $45.4 million in the latest quarter from $51.4 million a year earlier.

Since Google  and Microsoft have become competitors, Box will also need to convince investors that the company has gone beyond just online storage , WSJ wrote.

In its first IPO filing in March, Box wrote: “With an increasing number of information workers, industry trends toward cloud and mobility, and the increased need for global collaboration, we believe the market opportunity for enterprise content collaboration is significant and growing.”

The company’s growth strategy includes “significant investments in research and development to strengthen its existing platform, continually enhance usability and develop additional enterprise content collaboration functionality to improve productivity,” according to the March SEC filing.

Box will also to continue to develop partnerships with leading channel partners, mobile device and hardware manufacturers, telecommunications service providers and system integrators, as well as with independent software vendors, customers’ internal development organizations and other third-party developers, the company wrote in the filing.

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