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Pure Storage files for IPO later this year

All eyes will be on Pure in the coming months to see if it can buck the recent IPO trend in the tech startup sector

Flash firm Pure Storage is the latest in a long line of tech startups to throw its hat into the public ring, filing for its IPO yesterday.

Valued privately at roughly $3 billion, Pure submitted the filing last night, announcing tentative plans to raise up to $300 million. The document, lodged with the US Securities and Exchange Commission (SEC), gave some interesting insight into the company’s financials.  

Overall, it was a similar story to many of the other up-and-coming tech companies looking to go public in recent years – insanely fast sales growth and enough red ink to fill an Olympic swimming pool.

The flash firm, which is desperate to dethrone the reigning storage champions EMC, revealed that revenue more than quadrupled in the 12 months ended Jan. 31 to $174.5m.

However, net losses more than doubled in FY15 to $183.2m, from $78.6m the year before.

Pure’s strategy is a familiar one: sell cheap, push hard and hope for additional business once customers are bought in. Some of the figures released suggest that the model is working. More than half of Pure's customers bought more tech within 12 months, and its top 25 customers spent an additional $4 for every $1 of initial purchase.

However, while the model seems to work for top line growth, it’s not necessarily translating well on the open market. Box, which went public in January with a similar strategy, has seen its shares tumble 38% since opened with a bang.

Things look even bleaker for Pure when you take a look at the performance of rival flash players. Despite the strong appetite for solid-state technology in the data centre, the vendors seem unable to strike the right chord with investors. Violin Memory’s entry into the market was, in the words of the Wall Street Journal, ‘one of the worst U.S. public offerings in 2013’. Shares for the flash pioneer have recently been trading around the $3 mark, compared to its $9 offering price.

In July 2014, SanDisk acquired flash-based PCIe vendor Fusion-io for $1.1bn, nearly half a billion less than its IPO value. Similarly, Nimble Storage continues to see its share price decline.

Meanwhile, EMC has been using its weight to shove its way into a market that it wasn’t originally a part of and has become the dominant player in doing so.

According to IDC, the storage giant was the leader in all-flash arrays as of the first half of 2014, with 22.6% of the market, followed by Pure with 18%.

Pure does have a couple of aces up its sleeve. Board members include Aneel Bhusri and Frank Slootman, the CEOs of Workday and ServiceNow.

Workday and ServiceNow are two of only a handful of tech startups to buck this recent trend. Despite posting significant losses, they have managed to grow their share price; so pundits will be watching to see if they can sprinkle some fairy dust on Pure’s debut, expected within the next two months.

When it comes to taking on EMC, Pure’s advantage is in its name. It has the benefit of being a pure flash player and therefore not having to manage a legacy portfolio. However, Pure admitted in its filing that it will be difficult to take on Goliath.

“Many of our competitors benefit from established brand awareness and long-standing relationships with key decision makers at many of our current and prospective customers,” Pure said in the document. “We expect that our competitors will seek to leverage these existing relationships to discourage customers from purchasing our products.”

“In the event that we are unable to successfully sell our products to new customers or persuade our customers from continuing to purchase our products, we may not be able to maintain or increase our market share and revenue, which could adversely affect our business and operating results.”

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