Total sales rose 12.9% from a year ago and beat the top-end of management's guidance amid heightened demand for storage and networking services during the pandemic. "We want to help you get your stuff in and out of the metaverse from your Dropbox into the metaverse and vice versa, so creating that experience where everybody could be in the same virtual room and everybody could be seeing the same content."ĭropbox didn't need the metaverse to deliver very solid results in the third quarter. So we're certainly integrating with the metaverse," said Houston. the infrastructure that we've built make that happen. So making what document or presentation you want to give. "Our strength is in content so helping get your stuff into that virtual world.
What would Dropbox's role be in the metaverse? It is a long journey, but it is exciting." So for your digital content, Dropbox could help and that is what we are building towards. "Where Dropbox fits in if you are working in that kind of environment or in the metaverse, you need stuff. I am really excited about the vision," said Houston on Yahoo Finance Live. It's true that Dropbox's top-line growth is a big knock on the business's potential and/or sustainability, however, there's not much Elliott could do to change that as an outside shareholder.Bring on the metaverse, says Dropbox founder and CEO Drew Houston. Last quarter, annual recurring revenue (ARR) only grew 13% to $2.11 billion, while at the same time software-as-a-service (SaaS) and other cloud stocks were putting up high double-digit or even 100%+ growth rates.
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The one big complaint investors have with Dropbox is its slow revenue growth relative to other software companies, especially during 2020, when cloud-based products were in high demand. Through its dual-class share structure, CEO and founder Houston has 71.6% of the company's voting power, meaning at the end of the day, what he says goes.
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Houston has full controlĪnother puzzling part about Elliott's investment, which indicates this may just be a passive stake, is the fund will be limited in trying to enact change at Dropbox due to how the company is controlled. But unless it tries to force Houston to sell the business, there's likely not much meaningful change Elliott can make here in the short term. Looking at Dropbox's cash balance and current cash generation, there's not much Elliott could change from a capital returns standpoint.Įlliott could push for more bolt-on acquisitions like HelloSign and DocSend that have worked well for Dropbox over the last few years, and it could always push for more of a presence on the board of directors. What's more, the company has an aggressive capital returns strategy, with a current $1 billion buyback authorization in place. At a market cap of around $11 billion, that puts Dropbox's forward price-to-free-cash-flow (P/FCF) at around 16.
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Unlike Box, Dropbox is already highly profitable, generating over $100 million in free cash flow last quarter and guiding for $680 million in free cash flow in 2021. Both these changes will help improve the company's profit margins. Management laid off 11% of its employees this January and is starting to sublease its gigantic San Fransisco headquarters it bought pre-pandemic (the company has since switched to a hybrid work-from-home strategy). If they plan to execute an activist strategy, the strange thing about Elliott's stake is that Dropbox is already running plays out of what some might call the typical activist playbook.
If Elliott's strategy with past investments, including large companies like eBay and AT&T, are any indication, the fund will not want to sit back and relax with its newest stake in Dropbox. To sum it up, activist investors typically want to make changes at the businesses they take a big stake in, and can feud with management in the process. These aggressive tactics have led Levie to consider selling the company. It is also working to potentially make changes at the executive ranks, with rumors that it wanted to oust CEO Aaron Levie. For example, at Box ( BOX 5.30%), one of Dropbox's competitors, Starboard Value is currently fighting to take seats on its board. Image source: Getty Images What it could meanĪccording to the report, Elliott is holding discussions with Dropbox management, although it is unclear what these conversations have been about. The report also mentioned the fund owns more than 10% of the stock's outstanding shares.Īctivist investors sometimes push for seats on the board of directors, organizational changes, and changes in capital allocation.
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