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March 31, 2014

What Will Cloudera Do with $900 Million?

Alex Woodie

Cloudera’s motto is “Ask bigger questions.” In light of today’s news regarding a mind-boggling $900 million funding round and a $4.1 billion valuation, one big question rises to the surface: What in the world is Cloudera going to do with all that money?

With rumors swirling around the last round of funding and the stake that one-time Hadoop distributor Intel has taken in the company, Cloudera decided to set the record straight regarding the money side of the equation.

To that end, it affirmed today that its latest round of funding was not worth $160 million, as it announced two weeks ago. When Intel announced last week that it was giving up on Hadoop and would move its customers to Cloudera Distribution for Hadoop (CDH) and sell its intellectual property (IP) to Cloudera, the companies declined to say how much Intel was giving to Cloudera.

In light of that absence, Datanami estimated that Intel had invested perhaps $40 million in Cloudera. Turns out, we were wrong. Way wrong.

According to today’s announcement from Cloudera, Intel has taken an 18 percent stake in the company. Cloudera didn’t say it outright, but the difference of $740 million is almost certainly all from Intel. All those numbers add up to give Cloudera a $4.1 billion valuation, more than double the previous figure from two weeks ago. That valuation makes Cloudera worth about as much as Tableau, and about half what Teradata and Splunk are worth.

But the big question is: What is Cloudera going to do with all that money? Cloudera’s CFO, Jim Frankola, provided one view into the solution when he says the money will help “accelerate growth and deliver long-term sustainable value to our customers and partners.”

Perhaps a better answer is spotted further along Cloudera’s announcement. “Cloudera will use the funding to: Support the previously-announced collaboration agreement with Intel, further drive the enterprise adoption of and innovation in Hadoop, to which it is the largest open source contributor, and promote the enterprise data hub (EDH) market; support geographic expansion into Europe, Asia and now China through Intel’s market presence in that region, and expand its services and support capabilities for new open source projects; and scale the field and engineering organizations.”

The truth is that it probably doesn’t take $900 million to do those things, many of which the company was already doing. You can try to grow only so fast organically before the cart starts getting out in front of the elephant, so to speak.

We may never know exactly why Cloudera didn’t mention mergers and acquisitions (M&A) as a possible use of a war chest worth nearly a billion dollars–and possibly much more. But one has to imagine that M&A activity is within the realm of possibility here.

That’s especially true given the fact M&A made the to-do list for Cloudera competitor Hortonworks following its most recent round of funding. The argument in favor of M&A being one use of the funds grows when one considers that Hortonworks brought in “only” $100 million; Hortonworks says it could have gotten much more, but apparently either didn’t want or need the extra cash.

Cloudera and Hortonworks are both Hadoop leaders and employ many of the people who write the code that goes into Apache Hadoop (the software is free at the end of the day, you will recall). But it’s becoming increasingly clear that Cloudera and Hortonworks are playing decidedly different ball games.

Related Items:

Intel Exits Hadoop Market, Throws In with Cloudera

Hortonworks Snags $100M, Says It’s Worth $1B

Cloudera Valuation Tops $2B After Latest Funding Round