Yahoo big-data spin-off Hortonworks to raise $100m in Nasdaq stock market flotation

Shares in big-data pioneer priced at $16 each

The initial public offering of Yahoo big-data spin-off Hortonworks has moved a step closer after the company revealed its IPO price.

Founded only in 2011, Hortonworks' shares will be offered at $16 each, with the expectation that it will raise some $100m on the Nasdaq Stock Exchange. That pricing is above the expected range and values the Palo Alto, California-based company at $665m.

The IPO price values Hortonworks at about 60 times sales for its fiscal year to the end of April 2013, compared with a share price of just over two times sales for IBM and around five times sales for Oracle, according to Bloomberg.

Although it has grown fast, its current financials are far from impressive. In the fiscal year to the end of April 2013 sales rose from $1.6m to $11m, while its net losses increased from $11.5m to $36.6m.

And rivals, such as MarkLogic CEO Gary Bloom, questioned whether Hortonworks' open-source model will ever be profitable enough to make it a worthwhile investment.

"Investors are excited about the opportunities in the big data market and have had very limited opportunities to participate in this new space, so it's understandable Hortonworks wanted to be among the first to take advantage of investor interest. It will be interesting to see how well the company's open source business model stands the market's rigorous tests and demands, given its limited revenue and large losses."

He continued: "As a company that is also on an IPO path, we will be eagerly watching the market's reaction to Hortonworks and others to ensure our future track will align to meet investor expectations."

Bloom also questioned whether the biggest companies will trust the open-source model on something mission critical. "We believe enterprises in financial services, healthcare and government do not equate open source with security, reliability and data consistency. Savvy organisations are relying on companies with tested business models, like MarkLogic, to deliver proven enterprise-grade software to address their stringent data integration and management requirements," he said.

Hortonworks is among a number of companies commercialising software for big-data analytics based on the Hadoop framework, a standard for storing, analysing and managing large amounts of disparate types of data.

Hadoop was developed at Yahoo in around 2004 to help the flailing internet company to compete against Google. It was spun-out in 2011 with the assistance of venture capital firm Benchmark, with Yahoo also retaining a stake. Its founding management team included many of the people who developed Hadoop, with the exception of Doug Cutting, who works at Cloudera.