What the Cloudera Hortonworks mega merger means for the big data industry

Former rivals Cloudera and Hortonworks announced that they are merging this week, bringing together two once red-hot, heavily VC-backed unicorns that have both struggled to effectively monetise their open source-backed solutions.

The two publicly trading companies will “combine in an all-stock merger of equals,” the joint announcement stated on Wednesday.

“This compelling merger will create value for our respective stockholders and allow customers, partners, employees and the open source community to benefit from the enhanced offerings, larger scale and improved cost competitiveness inherent in this combination,” said Rob Bearden, chief executive officer of Hortonworks.

If we’re assigning winners and losers it looks like Cloudera is the alpha dog in this negotiation, with Cloudera stockholders due to own approximately 60 percent of the equity of the combined company and Cloudera‘s CEO Tom Reilly leading the newly joint business, with Bearden joining the board of directors.

Subject to regulatory and stockholder approval the deal is expected to close in the first quarter of 2019.

The two companies financials are spookily similar, with Cloudera reporting revenues for 2017 of $261 million, but the company still made a loss of $187 million. Hortonworks made an operating loss of $199 million for the full year of 2017, on revenues of $262 million.

Cloudera‘s journey to becoming a public company was slightly convoluted thanks to a massive investment from Intel which included a clause where Intel could not own more than 20 percent of the company.

Earlier this year Cloudera admitted to “mistakes in its sales strategy by focusing on customers who weren’t driving enough revenue. It claimed that it was focused on pursuing too many new customers outside of its target market and thus fell short in bookings within existing customer expansion,” according to Seeking Alpha.