Pivotal Software Stock Nosedives 40 Percent After Cutting Revenue Targets

Pivotal Software stock hit an all-time low Wednesday morning of just over $11 per share after cutting its revenue guidance for fiscal year 2020.

Shares of Pivotal Software hit an all-time low Wednesday morning, dropping more than 40 percent after the company lowered its revenue targets for its current fiscal year 2020. Shares of Pivotal are currently trading at just under $11 per share, the lowest since the company became public in 2018.

The San Francisco-based company reported a solid first fiscal quarter earnings report Tuesday night, but said total revenue for fiscal year 2020 (ending Feb. 3, 2020) is now expected to be between $756 million and $767 million -- down from its earlier projection of $803 million for the year. Pivotal, which is part of Dell Technologies, is expecting operating losses to be around $46 million for fiscal year 2020.

Pivotal CEO Rob Mee attributed the revenue drop to several factors including longer customer sales cycles due to technology complexity, as well as issues with sales execution.

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“We have taken steps to improve our sales execution including putting a new head of sales of the Americas in place, continuing to focus on building pipeline by increasing demand generations and sales ennoblement activities and introducing a new version of PAS (Pivotal Application Service) that runs on Kubernetes,” said Mee during the company’s first quarter earnings call Tuesday night. “We remain confident in our strategy and market opportunity for the long term.”

Pivotal’s CEO added that larger customer deals are lengthening in sales cycles. “I think it really is due to a lot of complexity in the technology landscape. If you think about the public clouds coming on-premise, if you think about the rise of Kubernetes and related technologies, people are experimenting with those. They're wondering where to go. There have been acquisitions in the market,” said Mee. “So I think it's really causing customers to take their time and think about what they're doing.”

For the fiscal 2020 first quarter, ended May 3, 2019, Pivotal reported sales of $186 million, up 19 percent year over year, beating Wall Street expectations. Subscription sales hit $129 million, an increase of 43 percent year over year.

However, Pivotal provided second quarter guidance sales of $185 million to $189 million. Wall Street was expecting revenue to hit nearly $200 million for its second quarter and the news sent Pivotal’s stock plummeting around 40 percent from its $18.54-per-share Tuesday close to below $11 as of mid-morning Wednesday.

During the earnings call, the company highlighted its partnership with Dell and VMware, which complements Pivotal’s direct sales force, as a positive strategy moving ahead.

“We are encouraged by the ongoing traction in pipeline our combined sales teams are building with PKS. Dell and VMware have thousands of customer relationships globally, which provides an important avenue for us to grow our business,” Mee said. “We continue to collaborate to make it easier for customers to rapidly adopt our software and modernize their most important applications.”

Overall, Mee says he’s “truly optimistic” about his company’s future.

“We do have a lot of momentum and the future is looking really, really good. And the challenges of people taking longer to make decisions and some of that market confusion is holding us back at the moment,” he said. “We're really well positioned and there is an awful lot of activity, there's a lot of great partnerships, and we continue to do the same kind of work that we've always done with really amazing outcomes for strategic customers. So I do think the future is still very bright despite our challenges this quarter.”