Dropbox works by storing users' data with cloud storage and synchronising files, eradicating the need to carry portable storage devices or storing to your computer. There are now over 200 million users of Dropbox who are mostly individuals rather than enterprises, unlike Dropbox's main competitor, Box. Dropbox nevertheless in the past year has been pushing a version of its storage service for enterprise use, charging a considerable fee. In terms of other monetised/premium services, individual users can buy more space although not many users have opted for this at the moment. Still, Dropbox have enjoyed strong revenue streams (the figure is a Dropbox secret) and also secured $250m of venture capital recently. Their valuation is around $4 billion (to grow substantially) and I believe an IPO could help raise a huge amount, most likely to be used for expanding via further acquisition of technologies (also not to mention the acquisition of talent in this process) that are compatible with smartphones and also the technology to store music, sound. The storage of map and app data can be a further area to venture into; either to develop organically or through acquisition.
So from this latter point, I think such opportunity is also Dropbox's number one challenge affecting valuation and stock performance after an IPO: it is really the ability to innovate storage technology so it copes as new devices, apps and platforms are changed and introduced. Another is the changing scene of cloud storage. When I started using Dropbox a few years ago, there weren't really that many 'well-known' competitors around. Now, there are several: Google, Microsoft and Amazon being the three I can think of at the top of my head. With these places giving space away for free, they could very easily snatch away Dropbox's users and eat into their profit margin. However, there is a lot of scope for growth at Dropbox which hasn't even started. Its clean-cut piece of stand alone technology giving users secure storage, a simple interface and fast software earns everyone's trust. Google and Microsoft for example, have been implicated in privacy breaching.
Box, valued at $1.2 billion is also poised for an IPO in 2014.
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Twitter (microblogging/social media tool, for those unfamiliar with Twitter)
There has been a lot of talk and hype about Twitter's IPO especially in recent days. It has been reported in the financial press that initial talks between Twitter with several investment banks have started. J.P.Morgan, Goldman Sachs, Morgan Stanley, BAML, Credit Suisse and others are vying for a lead role in this prestigious IPO. The social media platform also advertised for a 'Form S-1 preparer with other financial reporting duties' for "when we go public" on Linkedin, although it was later taken down. Reasons for Twitter going public are fairly simple. Twitter is valued at $10 million with its shares valued at around $20 on the private market and increasing in an IPO. Twitter's financial performance ($350 million in revenues in 2012; estimated $500 million in revenues this year; estimated $1 billion next year) and strong user and advertising interest makes it a good time to go public. Future prospects for social media companies like Twitter are good. They can capitalise on digital advertising through its huge user base & user data and channel more links with app developers. I believe that part of the financing raised from the IPO will be spent on a further string of acquisitions, given Twitter's recent track of them. Seeing what happened to Facebook's shares after their IPO, it is no surprise that Twitter is cautious about an IPO. Indeed, there will be a lot of comparisons between the IPOs of these two social media giants. There are a few lessons from the Facebook experience that Twitter can learn from, and hopefully avoid: overvaluation, using a dutch auction and not delaying the IPO too long so that there is no inflation of the market value - ergo a bubble waiting to pop.
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I previously talked about Blackberry's case for a joint venture with Tactus Technology to develop a microfludic keyboard for a touchscreen phone/tablet. (See here). Tactus has the technology while Blackberry already has the credentials to bring such a product to market. Such a radical innovation before anyone else on the mainstream market launches it could just be Blackberry's final life saver before it considers going private.
TMT aside, in the food sector, I believe Krispy Kreme is a good target for acquisition by a supermarket. The doughnut chain/franchise business had been suffering from a volatile bottom line in a recent years for a number of reasons such as accounting irregularities and aggressive but often unprofitable growth in its USA franchises. Revenues have grown but this has attracted more tax, eating away at profit. Yesterday, Krispy Kreme released their financial results, missing their revenue target and causing their share price to drop 13.3%.
Krispy Kreme doughnuts are stocked in selected Tesco stores in the UK as well as in Target and Walmart in the USA, but I believe Krispy Kreme could fare better in a supermarket for the increased consumer exposure because at the end of the day, Krispy Kreme is a highly desirable, unique and special brand. One way it has done this is through its designs of doughnuts, the packaging and the fact the chain has managed to keep itself relatively exclusive by having few stores compared to other 'occasion' confectionery and bakery retailers such as Thornton's and Millie's Cookies.
An acquisition by an international supermarket such as Tesco, Safeway or Kroger could give Krispy Kreme far more consumer exposure through Krispy Kreme doughnuts being sold in more supermarket stores. The theme of making junk food 'healthy' is also an important thing Krispy Kreme cannot ignore. It could be useful to use the cash of a parent company (Safeway for example has considerably more cash than Krispy Kreme) for product development and marketing in this area.
JH
In the next post: I will be discussing the future of 'Moshi Monsters' and 'Bin Wheevils'
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