Intel Corporation (NASDAQ:INTC) Will Feel The Sting Of Cloudera’s Lower Pricing

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Intel Corporation (NASDAQ:INTC) Will Feel The Sting Of Cloudera’s Lower Pricing

Cloudera’s preliminary IPO price of $12 to $14 a share, which was released on Monday, will have the company valued at $1.79 billion. This is less than half of its last valuation back in 2014, which was at $4.1 billion. The IPO prices are a hit to Intel Corporation (NASDAQ:INTC), which had heavily invested in Cloudera as part of a strategic partnership.

The chipmaker had put in $742 million having paid about $30 a share to buy a stake in Cloudera. Half of the shares were bought from the company while the other half was obtained from earlier investors. At the high end of the IPO range, Intel would be worth $348.2 million. It would be worth $925 million had it placed the cash in the S&P 500.

Causes of Cloudera’s poor pricing

Intel’s investment in Cloudera took place when private market valuations for steady start-ups were in the stratosphere. Around the same time Cloudera’s top competitor, Hortonworks, went public with discounted valuation levels. This is one of the contributions of Cloudera’s pricing according to the head of research at SharesPost, Rohit Kulkarni.

The company may also be spending too much in an effort to reach large prospective customers. It is already shouldering a net loss of $187.3 million even after spending over $200 million on sales and marketing. Kulkarni also mentions the growing perceived risk from public cloud players the likes of Amazon.com, Inc.(NASDAQ:AMZN) as another key contributor to Cloudera’s pricing.

But here’s the bummer for Intel

Intel put so much faith on Cloudera at a time when Cloudera’s technology Hadoop, was popular, but has since lost its market grip. The company went ahead to partner with Cloudera to help in promoting the technology in other global companies. For the last three years, the Chipmaker has spent over $15 million on Cloudera’s software.

Apparently, some Cloudera employees the likes of CFO Jim Frankola sold shares to Intel as well co-founder Mike Olson who still own about a 4% stake even after the IPO. Nonetheless, despite the possible falling off some of Intel’s venture funds, the company still has a whopping $17.1 billion in cash.  In the meantime, Intel’s stock closed at $35.76 witnessing an increase of $0.28 or 0.80%.