Nutanix (NASDAQ:NTNX) stock is climbing over 18% in pre-market trading after The Wall Street Journal indicated that the company could be acquired. NTNX offers cloud services to businesses.
Another provider of cloud services, VMware (NYSE:VMW), agreed to be taken over by Broadcom (NASDAQ:AVGO) for $61 billion earlier this year.
More Information About the Potential Deal
A number of entities have told Nutanix that they would consider buying it, and NTNX is expected to look to sell itself to a private equity firm or another cloud infrastructure provider, The Journal reported, citing unnamed sources.
But an acquisition may very well not materialize the newspaper added, noting that the takeover price would be more than $5 billion, which is Nutanix’s current market capitalization.
An Analyst’s Prior Take on a Potential Takeover
After Nutanix announced changes to its governance rules earlier this month, Needham analyst Michael Cikos wrote on Oct. 3 that: “At best, we see [the] announcement as further opening the door to suitors as an acquisition candidate.” Among the potential acquirers of Nutanix are: private equity firm Bain Capital, Cisco (NASDAQ:CSCO), Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), and HP Enterprise (NYSE:HPE), the analyst stated.
Background on Nutanix and NTNX Stock
Legion Partners Asset Management LLC, known as “an activist hedge fund,” has a stake of over 7% in NTNX, while private equity firm Bain Capital bought $750 million of Nutanix’s convertible notes in 2020.
In August, Nutanix reported significantly stronger-than-expected fiscal fourth-quarter results. However, the company’s revenue still fell 1.3% year-over-year, while it reported a loss per share of 67 cents.
On two positive notes, its annual contract value (ACV) billings climbed 27% YOY, while it generated a positive free cash flow of $23.2 million, versus a free cash flow loss of $42.2 million during the same period a year earlier.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
