Shares of Nutanix Inc. (NASDAQ: NTNX) plunged 11.6% on Monday after The Information reported that Google Cloud is accelerating its efforts to take market share in the private data-center space.
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More specifically, citing "two people with knowledge of the project," The Information says Google is testing "custom-designed computers" combining server, storage, and networking capabilities "for a handful of large customers to run in private data centers" in a bid to extend the reach of its cloud-based services.
This sounds strikingly similar to Nutanix's Enterprise Cloud business, which revolves around a platform built on what the company describes as its "hyperconverged infrastructure technology," combining computing, storage, virtualization, and networking capabilities.
"It is not certain [Google] will go further and sell these devices to a broad range of customers," The Information added. "But if it does, it would signal a shift in Google's cloud strategy for attracting Fortune 500 customers, in which the cloud unit would oversee hardware design for customers for the first time."
It likely doesn't help that Nutanix stock has still more than doubled over the past year even after today's decline, including a 15% pop last month alone after the company's latest impressive quarterly report.
On that note, investors should remember that hardware sales are a shrinking slice of Nutanix's top line (down 50% last quarter to $35.9 million, or less than 12% of total revenue), driven by management's conscious decision to de-emphasize the business in favor of driving growth from its higher-margin software and support services segment.
Still, you'll find few investors willing to shrug off the increased presence of a competitor as prominent as Google Cloud. And it was hardly surprising to see Nutanix stock pulling back in response to the news on Monday.
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