Horton hears a hoot from the wall street

Within the first  month of 2016, Hortonworks shares have seen a steep fall tanking below $10 for first time since it got listed on the stock exchange. More noteworthy has been the fact that its share value eroded around 37% in a single day. However, despite the aberration, the stock still is a recommended “buy” as per most of the stock analyst firms.

Hortonworks is the only fully open source Hadoop distribution currently and has an impressive market share. While relying mainly on services and support for its revenue, the company may not have been notching up billion $ revenues but had managed to get a billion $ IPO debut in November 2014. Being the first to race to stock exchange leaving behind Cloudera and MapR Hadoop distribution vendors, it has been raising hopes of a 'Red Hat' in data management space.

Tuesday’s (19th Jan 2016) crash may have dented the market confidence in this Hadoop unicorn. However, Hortonworks may be down for the moment but is definitely not out. For the full year 2015, Hortonworks estimates a total revenue of around $120 million – a growth of 129% in year on year basis. While some eyebrows have been raised at selling of shares by prominent VPs like Shaun Connolly and Greg Pavlik, they still hold more than 200K shares  each of the company.

From this point onwards, there seem to be 2 paths forward for the company if it needs to hold on competition from the likes of Cloudera and IBM which have bigger war chests and cash reserves. One is that it innovates aggressively to make Hadoop a viable alternate to database and not just the data warehouse to attract 100% of enterprise customers. Second is to get merged or acquired and there are many suitors for that. Options could range from Pivotal merger to acquisition by likes of Teradata or HP which already have a decent stake in the company. In either case, the open source movement and Hadoop is still going to be intact and will benefit by either of the moves.

Which way does the horton sit would however be clear by Q3 only. And we will keep watching this space.