Nutanix CEO: Public cloud is a new opportunity to extend what the company does

Nutanix said it was making continued progress on transitioning to being a subscription company.

Following a report of better-than-expected results and outlook by virtualized infrastructure company Nutanix, newly appointed CEO Rajiv Ramaswami told ZDNet that the public cloud presents an opportunity to extend the kind systems expertise the company has been selling for years. 

"The ability for us to tier data directly into the public cloud storage, or to move disaster recovery directly into the public cloud, presents new opportunity that we didn't have earlier that can add a lot of value for our customers," said Ramaswami in a telephone call following the report. 

Ramaswami was appointed in early December to take over from retiring co-founder Dheeraj Pandey. Ramaswami most recently was chief operating officer of products and cloud services at software giant VMware, before which he held positions at Broadcom, Cisco, and IBM, among others.

Nutanix has been making changes to better capture that cloud opportunity. In particular, before Ramaswami arrived at the company, Nutanix changed the way it rewards sales people to incentivize them to sell subscription-based software. Those kinds of changes are already showing results, but "we have a lot of execution ahead of us," said Ramaswami.

"We are in the middle of this transformation to subscription, and there's work to be done there in terms of completing that transition, driving adoption and then renewals, and doing so in a much more efficient way," he added. 

Nutanix has a partnership with Amazon AWS, and Ramaswami said "there's work to be done in really doubling-down on our partner ecosystem overall, and getting more out of that." Nutanix, he said, is also still finding the exactly right way to bring products "together as a portfolio that can actually line up to customer use cases."  

Nutanix reported fiscal Q2 revenue that topped analysts' expectations, and smaller-than-expected net loss, and an outlook for its annual billings that was above consensus. 

The report sent Nutanix shares up about 5% in late trading

CFO Duston Williams added that the company "continued to make progress on our transition to subscription and maintained our disciplined approach to managing operating expenses, which were lower than expected this quarter."

Added Williams, "We look forward to continuing to execute on our transformation and are confident Nutanix is well positioned for long-term value creation."

Revenue in the three months ended in January were roughly flat with the prior-year period at $346 million, yielding a net loss of 37 cents a share.

Analysts had been modeling $327 million and a 48-cent loss per share.

Nutanix noted that the Annual Contract Value, or ACV, which it defines as "the total annualized value of a contract, excluding amounts related to professional services and hardware," had billings that rose 14%, year over year, to $159.2 million. 

ACV billings is the main metric to track how the new sales incentive policy is playing out, in terms of bringing in a big quarter-to-quarter boost in amounts billed. It's a mark of its progress in moving from what was once a license for equipment to what is now essentially a subscription software business. 

Another effect of ACV will be to focus Nutanix on pleasing customers, Ramaswami
told ZDNet. "At the end of the day, customers have to like what they get from us, rather than I feel I'm in this contract and I can't get out," said Ramaswami. "That's not the right reason as to why you want to be with the customer. 

"To the extent we focus on customer value, then this transition is an opportunity for us: it provides flexibility for the customer, and it allows us to be much more disciplined about the value we're providing to the customer." 

For the current quarter, the company forecast annual contract value billings of $150 million to $155 million,  which is higher than a consensus for $144 million.