Netezza Files To Go Public

On March 22nd, Netezza announced that it had filed a form S-1 with the SEC regarding a proposed initial public offering (IPO) of its common stock. You can find Netezza’s registration document here.

This is great news for Netezza, and I’d argue, for special-purpose DBMS companies in general. As I’ve often said in this blog (e.g., Pimp My Ride; What’s a Column-Oriented Database; Half-Man, Half-Machine, All Cop; MarkLogic: DBMS or search engine), I’m a big believer in the future of special-purpose database management systems.

Netezza sells a special-purpose data warehouse appliance, the Netezza Performance Server. The sales pitch is all about performance and, if you’re interested, you can find a nice collection of technical white papers here, as well as an interesting web page that describes their Intelligent Query Streaming, that makes queries run at “physics speed” (pretty cool technical marketing).

Simply put, unlike a general-purpose DBMS that’s supposed to do everything, Netezza sells an appliance that designed to do one thing very well: data warehouse queries at large scale with high speed.

Per figures from their S-1,

  • Netezza has grown revenues from $13.6M in their FY04 (which ends 1/31/04) to $79.6M in FY07, representing an 80% compound annual growth rate over that period.
  • FY07 revenue grew 48% over FY06, which was $53.9M
  • FY07 gross profit was $47.5M, giving them 60% gross margins.
  • If I de-appliance their numbers by dividing $47.5M by 0.8 to reflect a typical software pure-play’s 80% gross margins, that implies an equivalent pure software play size of $59.4M.
  • They ended FY07 with 225 employees and 87 customers.
  • Somewhat surprisingly, they posted a net loss of $8M in their most recent fiscal year. (I’d have guessed that you needed to be around their size with ~50% growth — and profitability– to go public in this day and age.)
  • They have a large R&D investment of 22% of sales. However, analytically, I’d argue that appliance companies should measure R&D investment as a either (1) percent of equivalent pure-play software company size (a Kellogg metric if there ever was one), which works out to 30%, or (2) as a percent of product gross margin, which works out to 47%. Wow.
  • If I’m correctly reading the prospectus, they have raised a whopping total of $97M in venture capital across 4 investment rounds.
  • Their run-rate figures (4x the most recent quarter) are $106M in revenues, a 1.8M net loss, and R&D investment of 18% of sales.
  • They like owning IP: they have 8 US patents issued and 14 pending.
  • Mark Logic investor Sequoia Capital, rarely one to be left out of an exciting company, owns about 15% of the stock on a pre-offering basis.
  • They have requested the ticker symbol: NTZA

Disclaimer: I’m not a financial analyst and don’t pretend to be one; I don’t recommend buying or selling stocks.

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