Box IPO Delay Wouldn’t Be Without Compromises

It hasn’t been a great couple of weeks for Box.

First came word that Intralinks bought DocTrackr, an information rights management vendor that Box reportedly had its eye on. Then last night, the Wall Street Journal and others were reporting that Box plans to delay its IPO.

What’s happening here?

It could be a case of simple bad timing or even misinterpretation. For what it’s worth, Box spokesperson, Ashley Mayer told me last night in an email that the company will not be commenting on the timing of the IPO. That changed today when a company spokesperson issued an official statement in response to the spate of articles on their IPO:

“Our IPO has never had a set date. Since filing, we’ve planned on going when it makes the most sense for the market. That plan hasn’t changed.”

And a person close to the company told me he was amused watching the tech press trip over itself over this story (guilty as charged) because no tech company is on the road right now due to the current market volatility.  As this person said somewhat exasperatedly, “A delay would imply there was a schedule.”

So what we have is a classic case of conflicting stories. Tim Walters, who is partner at Digital Clarity Group also thinks it might be a non-story for many of the reasons Alex Wilhelm outlined in his story on TechCrunch last night regarding the sorry state of tech stocks  in general these days, but Walters says a delay would not be without risk.

“It *could* hurt sales efforts, and revenue (and so eventually the IPO) insofar as competitors will (or should) start spewing FUD about Box possibly being sold, or struggling, or lacking management vision, etc. But that just means that tomorrow’ FUD will have a slightly different composition than yesterday’s — and it’s up to Box’s hired-gun, enterprise-experienced sales executives to figure out how to deal with that,” Walters wrote in an email.

Geoff Bock, principal at Bock & Company, who has been writing about content management for many years says this may force Box to look at where its value proposition lies and that may not be a bad thing in Bock’s view because much of Box’s offering has become commoditized.

“It’s important to remember that Box got started as a networked file sharing service for the mobile revolution — providing easy access to files from any device. Yet these capabilities are now commodity features, available from a multitude of vendors large and small,” he explained.

Bock sees the market battleground transforming to developing and deploying mobile apps that have smart access to backend enterprise resources and he believes if Box can exploit this they can evolve past the commodity services model.

“It’s clear to me that Box provides important services. The company seems to be investing in metadata management and APIs to integrate with existing enterprise resources. Box may well become the mobile middleware that powers these third-generation experiences. The jury’s still out and I am continually looking for proof points,” Bock said.

Bock’s vision is actually in line with comments that Box CEO Aaron Levie made at South by Southwest in March in an on-stage interview with Jessi Hemple from Time’s Brainstorm Tech. Levie said that in five years he sees his company transforming to one where customers build applications on top of the Box platform, rather than using the Box app directly as they do today.

Lawrence Hawes, who is principal at Dow Brook Consulting and has been covering the cloud collaboration space for a long time, says the biggest risk with a delay is that potential investors might get spooked.

“Potential investors may have another look at Box’s finances and growth prospects, and then decide to not participate or to do so at a lower share price,” he said. Hawes added, ” Box may well have to price their initial offering lower and raise less capital than they wanted; they will get a better sense of that when they finally start their road show and talk to prospective institutional investors.”

For Hawes, the big, unanswered question is whether Box will still be able to raise enough money with this IPO to gain a couple of years worth of operating funds. “If not,” he says “they may have to agree to be acquired by a larger firm to make an exit that satisfies current investors.”

But Bock has different advice for investors. “I would advise investors to follow the metadata and the middleware as they try to value a third-generation platform. There’s much more at stake than securely mobilizing access to shared files.”

Whatever the outcome, it seems that Box is at a crossroads and what happens over the next few months could define the future direction of the company, one in which they continue as an independent though publicly traded company or one in which they are sold and absorbed into another organization.