Editor’s Comment: We weren't expecting this announcement, but on reflection, it's not a surprise as the Hadoop market has moved on considerably and both of these companies have their core in Hadoop.
We have tried to reach out to several people at both companies locally for an official comment, but unsurprisingly, at the moment, people are digesting the news themselves so other than speaking to a few shocked people at the time of writing, we don’t have any on or off the record insights from employees.
The markets reacted well with Cloudera shares shooting up, but in our view, there is ignorance amongst the traders. We are sure traders will make some money on some “short-term positions”, but the reality of this merger is very complicated – understanding the way the market is moving, the polar opposite approach they have taken in the go-to market strategies, and the potential for technology overlap in their product sets. We doubt the financial markets understand this in any depth. It's complicated technical stuff that the short-term stock price simply doesn’t reflect.
The CEOs both said it’s really complementary and we get the “strapline” of “from the Edge to AI”, but anyone with knowledge of these companies knows that they are built on the same open source project, "Apache Hadoop”. Hence, there is a lot of product and technology overlap to sort out over the coming months.
From a strategy and ethos point of view, the companies are also very different. Hortonworks has endorsed a purpose play open source approach while Cloudera has wrapped more proprietary technology around their offerings and tackle the market with a more commercial enterprise sales approach.
Most important of all is the massive market shift that is going on. The Big Data market is merging with IoT, AI and machine learning, and the public cloud providers are making big strides in this space.
One of the early values of Cloudera and Hortonworks was they helped companies with the complexity of setting up a Big Data platform. But things have changed. The cloud providers now do this and make it very easy, and at a time when the Hadoop companies are trying to establish themselves as AI players, these same public cloud providers seem to be leading the charge in the AI space.
The bottom line is that the merger buys both companies time, but they need to come up with a strategy to navigate the competition from Ali Cloud, Google Cloud Platform, AWS, IBM Cloud and Azure.
The full press release is as follows:
Today, Cloudera and Hortonworks have jointly announced that they have entered into a definitive agreement under which the companies will combine in an all-stock merger of equals. The transaction, which has been unanimously approved by the Boards of Directors of both companies, will create the world’s leading next generation data platform provider, spanning multi-cloud, on-premises and the Edge. The combination establishes the industry standard for hybrid cloud data management, accelerating customer adoption, community development and partner engagement.
Tom Reilly, CEO at Cloudera, said, “Our businesses are highly complementary and strategic. By bringing together Hortonworks’ investments in end-to-end data management with Cloudera’s investments in data warehousing and machine learning, we will deliver the industry’s first enterprise data cloud from the Edge to AI. This vision will enable our companies to advance our shared commitment to customer success in their pursuit of digital transformation.”
“This compelling merger will create value for our respective stockholders and allow customers, partners, employees and the open source community to benefit from the enhanced offerings, larger scale and improved cost competitiveness inherent in this combination,” stated Rob Bearden, CEO of Hortonworks. “Together, we are well positioned to continue growing and competing in the streaming and IoT, data management, data warehousing, machine learning/AI and hybrid cloud markets. Importantly, we will be able to offer a broader set of offerings that will enable our customers to capitalise on the value of their data.”
Under the terms of the transaction agreement, Cloudera stockholders will own approximately 60% of the equity of the combined company and Hortonworks stockholders will own approximately 40%.
Cloudera’s CEO, Tom Reilly, will serve as Chief Executive Officer; Hortonworks’ COO, Scott Davidson, will serve as Chief Operating Officer; Hortonworks’ Chief Product Officer, Arun C. Murthy, will serve as Chief Product Officer; and Cloudera’s CFO, Jim Frankola, will serve as Chief Financial Officer, of the combined company. Hortonworks’ CEO, Rob Bearden, will join the board of directors. Current Cloudera board member, Marty Cole, will become Chairman of the board of directors.
Establishes the next generation data platform leader with increased scale and resources to deliver the industry’s first enterprise data cloud, providing the ease of use and elasticity of the public cloud from the data centre, to the Edge and everywhere in between
Creates a superior unified platform and clear industry standard from the Edge to AI, substantially benefiting customers, partners and the community
Accelerates market development and fuels innovation in IoT, streaming, data warehouse, hybrid cloud, machine learning/AI
Expands market opportunity with complementary offerings, including Hortonworks DataFlow and Cloudera Data Science Workbench
Enhances partnerships with public cloud vendors and systems integrators
Expected to generate significant financial benefits and improved margin profile:
Approximately $720 million in revenue
More than 2,500 customers
More than 800 customers over $100,000 ARR
More than 120 customers over $1 million ARR
More than $125 million in annual cost synergies
More than $150 million cash flow in CY20
Over $500 million cash, no debt