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• DROPBOX INITIAL RELEASE DATE FREE

Our sur­vey results also indi­cate that the changes to Dropbox’s plat­form and pric­ing struc­ture will result in accel­er­at­ed churn in the near term, about which man­age­ment is rarely trans­par­ent in its own right.

Spruce Point’s pro­pri­etary cus­tomer sur­vey reveals that half of Drop­box users – indi­vid­ual and busi­ness alike – do not believe that the new fea­tures jus­ti­fy the price hike, and that two thirds do not believe that it would be dif­fi­cult to shift to a dif­fer­ent cloud stor­age provider. The cus­tomer response appears to be extreme­ly neg­a­tive, with users speak­ing out across forums to voice their dis­plea­sure with the price hike. Not-So-Sticky Cus­tomer Base Giv­en A New Rea­son To Switch: In an attempt to appeal to the enter­prise mar­ket – and to raise prices on exist­ing cus­tomers – Drop­box rolled out an entire­ly new plat­form (“Drop­box Spaces”) in Sept 2019.The ini­tial response to Dropbox’s new fea­ture roll­out appears to be “too lit­tle, too late” among these poten­tial customers. Indus­try experts tell us that Drop­box is vir­tu­al­ly “nowhere to be seen” on the mar­ket­ing trail in the enter­prise ver­ti­cal, as it does not meet many of the strin­gent com­pli­ance and cyber­se­cu­ri­ty needs of large busi­ness­es in heav­i­ly-reg­u­lat­ed indus­tries. Drop­box ini­tial­ly carved out its niche among retail and SMB users, and has failed to make sim­i­lar inroads among large cor­po­rates. Miss­ing The Boat On The Remain­ing TAM: File stor­age and sync com­peti­tors such as Box, as well as oth­er new entrants, are focus­ing their efforts on the enter­prise ver­ti­cal, where com­pa­nies are increas­ing­ly look­ing to out­source file stor­age onto the cloud in a secure man­ner.Drop­box is effec­tive­ly a “pure play” com­pa­ny in an indus­try which is becom­ing increas­ing­ly com­modi­tized to the point of near-zero returns at the extreme. Mar­gin expan­sion – as high as 1,500 bps per year as recent­ly as FY17 – has also skid­ded to a vir­tu­al halt.

DROPBOX INITIAL RELEASE DATE FREE

Spruce Point believes that its new nor­mal of accel­er­at­ed churn, increased capex, and ris­ing cus­tomer acqui­si­tion costs will come to bear on results as soon as the next few quarters. Drop­box is a melt­ing ice cube, and management’s last-ditch turn­around attempt is poised to dis­ap­point lofty ana­lyst expec­ta­tions. Some investors take solace in Dropbox’s seem­ing­ly healthy cash flow, but Spruce Point believes that its FCF mar­gin is mis­un­der­stood by the Street by as much as 2x. We have col­lect­ed unique data show­ing that its late FY19 deci­sion to raise prices after cre­at­ing a more “busi­ness-friend­ly” plat­form – dubbed the “New Drop­box” – has enraged some of its core individual/SMB user base, and has giv­en cus­tomers new rea­son to con­sid­er switch­ing. Mean­while, management’s recent attempt to reac­cel­er­ate growth appears to be falling flat. Spruce Point finds over­whelm­ing evi­dence that the sto­ry has changed: Drop­box is a decel­er­at­ing busi­ness in an increas­ing­ly low val­ue-added space, with lit­tle net­work effects or bar­ri­ers to entry. Drop­boxs (“DBX” or “the Com­pa­ny”) was once seen – and is still seen by most investors – as the quin­tes­sen­tial Sil­i­con Val­ley soft­ware uni­corn: a fast-grow­ing, high­ly cash-gen­er­a­tive SaaS com­pa­ny with a sticky cus­tomer base and a long run­way for upsells.