Cloud Data Sector Sees Cloudera Exit Wall Street with $5.3 Billion Sale

Data – the ability to bring it together from disparate places and analyze it for business outcomes – represents the next gold mine in cloud. Just look at all the talk surrounding lakes, warehouses and pipelines. And look at the platforms coming out to capture and evaluate all that loose information. The excitement around cloud data is real. The possibilities around cloud data are real.

But even a piping hot emerging cloud sector can butt up against human impatience.

That appears a key reason why Cloudera, which develops cloud data and analytics platforms, has agreed to sell to private investors.

To its credit, Cloudera in recent quarters made notable improvements in earnings and customer retention. Those strides came as the company released different types of solutions to help enterprises corral their cloud data. Along the way, the indirect channel remained vital to Cloudera’s strategy. Yet, even with more stable financials, the vendor could not appease Wall Street’s unquenchable thirst for more.

Going private seems Cloudera’s best option for competing in the cloud data sector without undue distraction. And that’s just what the company is doing.

Escaping the Pressures of Wall Street

Cloudera on Tuesday announced an all-cash, $5.3 billion sale to private equity firms Clayton, Dubilier & Rice and KKR. The deal should close in the second half of the year. It will mean Cloudera will then act as a private company. In response to the news, the vendor’s shares on Tuesday were up nearly 24% as of 1:45 p.m. ET, closing in on the $16 shareholders will receive.

To be clear, Cloudera still will face pressure to grow. Private investors don’t just sit back and give their portfolios total freedom and endless time. Many do, however, allow more breathing room than does Wall Street. While Cloudera CEO Rob Bearden phrased the matter differently, he practically said as much in a press release.

Cloudera’s Rob Bearden

“This transaction provides substantial and certain value to our shareholders while also accelerating Cloudera’s long-term path to hybrid cloud leadership for analytics,” he said. “We believe that as a private company with the expertise and support of experienced investors such as CD&R and KKR, Cloudera will have the resources and flexibility to drive product-led growth and expand our addressable market opportunity.”

Daniel Newman, principal analyst at Futurum Research, agreed.

Futurum Research’s Daniel Newman

“The move to go private will be an accelerator,” Newman wrote in a June 1 blog. “I believe that KKR and CD&R are strategic partners that are taking the company private with a clear ambition to grow faster and with less pressure from the Street.”

And while Cloudera’s latest earnings reflect “another solid quarter,” Newman said, the vendor should be able to perform better within a private-equity setting.

“I’ve long felt that the pressures of quarterly reporting to Wall Street can create a short-sightedness that deters longer-term strategic planning and product development,” he wrote. “Cloudera needs to make these changes to enter its next phase of growth, and being held privately by firms with a strong track record of strategic investment will act as an enabler for the company.”

Eyes on the Prize: ‘Long-Term Transformation’

That’s the exact goal, according to Cloudera’s soon-to-be new owners.

“We very much look forward to working with Cloudera as it continues to execute its long-term transformation strategy,” said Jeff Hawn.

Hawn serves as operating partner at CD&R and will step in as Cloudera’s chairman once the transaction closes.

Furthermore, Cloudera, Hawn said, “has made significant progress establishing …

… the Cloudera Data Platform as a leader in hybrid and multicloud analytics, and we believe that our experience and capabilities can offer valuable support to accelerate expansion into new products and markets.”

Newman, too, sees Cloudera and its acumen in cloud data as well-positioned. Moreover, the vendor, he noted, stands out for its potential “to monetize the growing demand for analytics in a data-rich world.”

Despite the support from CD&R and KKR, Cloudera has the right to shop for a superior purchase offer; that right lasts until July 1.

Cloudera’s announcement this week comes as little surprise. Industry observers have expected for a while that the company might sell. Speculation ran rampant last year, although observers mostly targeted IBM or another cloud-focused vendor as the buyer.

Now, as Cloudera progresses toward its next phase, it’s doing so in a way that extends it some autonomy. And it’s doing so with the help of two new acquisitions of its own: Datacoral and Cazena.

Cloudera said the SaaS providers bring self-service expertise to its public cloud platform.

“The acquisitions will enable Cloudera to usher in a new era of low-code, no-code self-service by automating complex operations — enabling our customers to focus on getting value from their data rather than configuring, operating and managing the underlying infrastructure,” Bearden said. “Both businesses will enable our combined customers to enjoy a reduction in complexity and faster time to value for their data initiatives, leading to improved insights, faster innovation, and stronger engagements with their customers and partners.”

Newman, for his part, views the Datacoral and Cazena purchases as smart.

“I believe that these acquisitions are not only strategic but will accelerate Cloudera’s road map for self-service data and analytics in the public cloud and expand its market opportunity,” he wrote.