Dheeraj Pandey On Nutanix Stock Price Fall: ‘Naysayers Are Best Ignored’

‘If you build something bold and audacious, you got to fall. But once you fall, how do you rise to the occasion and how do you learn from those mistakes, is what builds great companies,’ says Nutanix CEO Dheeraj Pandey.

Pandey On The Record

Nutanix stock plummeted 32 percent last week after the hyper-converged pioneer reported weaker-than-expected financial guidance for its current third fiscal quarter. Before last week, Nutanix had yet to show any real decline in terms of sales momentum or any kinks in its hyper-converged software armor.

With Nutanix’s Nasdaq market cap dropping from roughly $9 billion to $6.4 billion as of Thursday, the company’s CEO has a message to all of its doubters.

“The best of companies have had stock drops like this,” said Nutanix CEO Dheeraj Pandey, who also co-founded the San Jose, Calif.-based company in 2009. “If you build something bold and audacious, you got to fall. But once you fall, how do you rise to the occasion and how do you learn from those mistakes, is what builds great companies.”

In an interview with CRN, Pandey talks to CRN about his message to channel partners and investors as well as Nutanix’s innovation and vendor partnership strategy.

What’s your message to all of Nutanix’s doubters out there who saw your stock drop?

[Former Cisco CEO and Chairman] John Chambers used to say this, ‘The only way you can go from being a good company to a great company is when you go through these kinds of shortfalls.’ You can’t be a great company unless you actually go through these temporary setbacks. There’s another saying that goes on at Amazon that one of our employees said to me, which basically reads as, ‘Steady progress towards seemingly impossible goals will win the day.’ So setbacks are temporary. Naysayers are best ignored. That’s what we really believe in. It’s really brought the company together. The best of companies have had stock drops like this. You go back to Adobe 2009 to 2012, Salesforce’s 2009 to 2012, and Amazon’s journey from 2003 to 2007 -- that’s where the vulnerability of these companies emerge. If you build something bold and audacious, you got to fall. But once you fall, how do you rise to the occasion and how do you learn from those mistakes is what builds great companies.

What are your thoughts on Nutanix’s stock fall?

We gave a guidance for quarter three that was softer than what the street had expected. There are a lot of questions about why this happened. We had such a great fiscal year 2018. We did a really good job with large customers and existing customers, but [we] took our eyes off our ball when it came to new customers in 2018 which basically is hurting us a little bit with respect to pipeline in 2019.

Do you have a message for specifically your channel partners?

The most important thing for them is, look, we are investing in folks. We are investing in top of the funnel activities and investing in training. This is dollars that will actually get to the partners. They can really understand what it means to be a benefactor of this investment that we’re doing for pipeline and lead generation and things of that nature.

You cited slower-than-expected sales hiring at Nutanix as a reason for the weak guidance. What’s your strategy to solve this?

Actually, there is another message to channel partners around this, if there is channel reps and channel SE’s who want to come work for a vendor, I think this could be a great opportunity for them because we’re hiring a lot in the coming couple of quarters. We don’t want to recruit directly from a partner, but if there’s somebody who is actually going to leave anyway, they might want to look at Nutanix as an opportunity as an employee. Simply because of the hiring focus that we’re talking about doing. … [Also] for new accounts, for channel partners who want to get into white space -- because they are also thinking hard about white space accounts-- they should absolutely give us a call because we have shared interest in their white space being our white space too.

Do you think your massive portfolio expansion and shift to a software-centric, subscription-based sales model over the past two years has been a difficult transition?

In some sense, our sales force did a phenomenal job transforming our business from appliance to software and now software subscription. No company in the history of IT has had to go through two transformations in two years. We’ve had to go through that because we started as an appliance company nine years ago, but we also had to pivot based on what the world was asking for. The world was asking for Nutanix to be the operating system software company. The world was asking for subscription and term licenses, so we had to move at the pace of the market. Along the way, the sales force did the best that they could and probably forgot some things about what it means to prospect new accounts. I don’t really look at that as a negative thing. I believe that a very special sales force like Nutanix is required to do these two transformations in two years.

Is the innovation engine still roaring at Nutanix? What are you most excited about?

We’ve had some customer wins and new product wins beyond the Nutanix Core offering. When it comes to Nutanix Essentials and Nutanix Enterprise, we’ve made some real inroads to micro-segmentation, some real inroads with Nutanix Files which is a $10 billion market. If you think about Files alone, we are barely scratching the surface of – how are we doing displacing NetApp with pure software running on commodity servers? I think it’s going to be one of the biggest offerings from Nutanix simply because it’s a system record, it’s a data plane of products. So we expect to see a lot more coming from Files itself.

What solution are you excited about for partners?

In the enterprise, both Era -- which came out to be a CRN product of the year – and database as-a-service has come out in flying colors especially in large accounts which have a lot of Oracle and SQL Server. I think database as a service is looking at a great product introduction in the first three months of go to market. Another is just payment in how we can go and help our partners think about multi-cloud desktop as a service sales motion where we started to see a real need and opportunity emerge. We were at a lot of the recent Amazon conferences and one of the hottest products that people wanted to meet and talk about was Xi Frame which is a desktop as-a-service in a multi-cloud world with a control plane and data plane – both of them can be multi-cloud.

Talk about the importance of your recent Cumulus Networks partnership?

Networking is one of the last areas that needs to go through the white-box transformation which is about pure software-defined infrastructure. There’s two approaches today, one of them is just talking about overlay networks, then the other one is the transformation about the underlay and the overlay – that’s where Cumulus comes in. They talk about the underlay transformation of using white-box for top of the rack, then we partner with then and integrate with them on the underlay automation, but then we bring in our Flow product for the overlay itself. That’s where a lot of the micro-segmentation work that we’ve done is happening in conjunction with partners like Cumulus themselves. Juniper Networks is another one we’ve doubled down with, as we’ve had with Arista Networks. Our networking partners are inspired. They look at this as a great opportunity for them to talk about the full rack solution. That’s the reason why Juniper, Cumulus and Arista have come so close to us.

Talk about what Nutanix is doing with Google.

We’re doing a lot of good work with security companies when it comes to virtual firewalls and virtual load balancers. We’re not just running virtual machines, which are applications, but also these security virtual appliances and then using what we call service insertion and service chaining to help bring up a true software-defined infrastructure experience for our customers. We’re doing a lot of work with Google and [Nutanix] Frame which is quite promising. We’ve done a lot of good where Nutanix is not running on Google’s bare-metal, but on Google’s virtual metal and the entire Nutanix experience can be had on Google’s data center without really setting up any physical machines. There’s a lot of good work we’ve done with Google within the last 12 months.