Carl Icahn got what he wanted rather quickly at
But the wily financier still has a lot of work ahead to mine silver from this cloud.
Cloudera announced Monday that it reached a deal with Mr. Icahn that will put two of his representatives on the company’s board. That came less than two weeks after the famed activist announced a 12.6% ownership stake in the troubled enterprise software provider. The deal announced Monday includes a “standstill” agreement that effectively heads off a proxy challenge, though Mr. Icahn had not yet broadcast any plans for such a campaign.
The news still took Cloudera’s stock down more than 4% Monday, leaving the shares up just 5% since Mr. Icahn’s interest in the company became known. The stock has also never recovered from the drubbing it took in June after a disastrous quarterly report that included the surprise departure of chief executive Tom Reilly. The company framed that move as a retirement—though it came just eight months after the 56-year old executive was designated chief of the company that resulted from Cloudera’s merger with Hortonworks.
The upshot is that Mr. Icahn has managed to find one of the few cheap cloud stocks around. Cloudera was trading barely above two times forward sales when he announced his stake. That multiple is below that of even other challenged cloud stocks like
and a mere fraction of the 15 to 20 times multiples commanded by many others in the space. The S&P 500 Software & Services Group—mostly comprised of legacy corporate tech names like
—averages around 5.6 times forward sales.
But cheap isn’t always a bargain in this market. Cloudera’s last report made clear that the company faces several issues, including increased competition from powerful cloud service providers such as Amazon, Microsoft and Google. That competition won’t be settling down soon. The company also expects to burn cash for the current fiscal year and is seeking a new leader in the midst of a crucial transition period as it integrates operations with Hortonworks. Those challenges will likely limit the interest of any buyer, even given Cloudera’s low valuation now. Mr. Icahn may need a long while to make rain from this cloud.
Write to Dan Gallagher at email@example.com
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