Shares of Nutanix rocketed higher Friday on a report the maker of cloud computing network management software is up for sale. The move partially reverses a slide for NTNX stock, which had dropped 40% this year before sale speculation surfaced.
NTNX stock catapulted 24.6% to close at 26.35 on the stock market today.
The San Jose, Calif.-based company is talking to private equity firms as well as technology companies, The Wall Street Journal reported. Private equity firms have been targeting software companies, especially cybersecurity companies.
Also, private equity firm Bain Capital invested $750 million in NTNX stock in 2020.
One analyst also speculated on a Nutanix sale on Wednesday, before the WSJ report.
NTNX Stock: Moving To SaaS Business Model
"Nutanix represents an interesting strategic asset in hybrid-cloud infrastructure as it continues to pivot to a software and increasingly SaaS (software-as-a-service) model," RBC Capital analyst Rishi Jaluria said in a note to clients.
He added: "As large IT vendors need a view into both public and on premise spending, Nutanix could help solve that given its large scale, sales force and market opportunity."
Nutanix's software manages network, storage and server infrastructure in cloud-computing platforms. Nutanix has been transitioning to a SaaS software model from selling hardware appliances.
At Barclays, analyst Tim Long said a private equity deal is likely in a report published on Friday.
Nutanix Stock: Potential Tech Buyers
"NTNX is targeting long-term transformational changes that are tougher to execute as a public company, which is subject to scrutiny quarter to quarter," Long said. "Getting bought by PE could afford NTNX the opportunity to prove out its go-to-market and product strategy with a longer time horizon. Moreover, with NTNX expected to have positive free cash flow and operating income, the threshold is theoretically lower for a potential PE buyout."
JPMorgan analyst Pinjalim Bora in a report said IBM looms as a possible buyer.
"With IBM, Nutanix is now the preferred infrastructure platform for Red Hat OpenShift, and more recently Nutanix's entire infrastructure solution has also been certified for the entire Red Hat Ecosystem," he said.
At Raymond James, analyst Simon Leopold doubted a buyer will surface among tech firms such as Dell, Hewlett-Packard Enterprise, Cisco Systems or Google-parent Alphabet.
"We have heard discussions of potential Nutanix sale/buyout before, but have struggled to envision a perfect strategic fit among industry vendors," he said in a report. He noted that Nutanix has been shedding salespeople.
NTNX stock holds a Relative Strength Rating of 86 out of a best-possible 99, according to IBD Stock Checkup. The company's Composite Rating, however, stands at just 56 out of 99.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
