Sphere 3D: A Disruptive Cloud Technology Player

| About: Sphere 3D (ANY)


This article highlights a company that has developed a unique technology platform that can enable the migration to the cloud for software users and publishers.

Investors have the opportunity to enter at a valuation that is low in comparison to its peers.

Sphere 3D is a unique virtualization technology solution provider that has described itself as a company that “solves the problems that previously were considered unsolvable”.

Glassware 2.0 technology makes it possible for today’s devices to access yesterday’s software, without sacrificing performance.

The most recent partnership and cooperation with Dell Healthcare strongly validates Sphere 3D’s technological uniqueness and credibility.

My followers at Seeking Alpha and a number of readers will be aware that yesterday I published an Instablog response to an article that was intended to, bluntly, throw allegations at a company that in my regard offers great investment potential and revolutionary IT technology.

Rather than wasting time in a meaningless street fight with an analyst that will do great efforts to drag the company, its management and insiders through the mud, I would like to introduce readers to the unique business potential of Sphere 3D (SPIHF).

My Followers in SA that mostly know me from my series of articles in 2011 about Kandi Technologies (KNDI) know that I don't take DD lightly and strive to be objective in my articles to let the readers decide.

Rising Cloud

Undoubtedly, the cloud attracts such enormous attention, even from the largest players, due to its market potential as enterprises are increasingly and almost inevitably shifting their IT focus to the cloud. Indeed Gartner predicts that the bulk of new IT spending by 2016 will be for cloud computing platforms and applications with nearly half of large enterprises having cloud deployments by the end of 2017. Source: Gartner Says Cloud Computing Will Become the Bulk of New IT Spend by 2016.

Such is the importance and undeniable potential of the cloud that Microsoft (NASDAQ:MSFT) appointed its former Head of the Cloud and Enterprise group, Satya Nadella, as its new CEO. Other firms that have been actively developing solutions for the cloud include: Intel (NASDAQ:INTC), Oracle (NYSE:ORCL), SAP AG (NYSE:SAP), International Business Machines (NYSE:IBM), Hewlett-Packard(NYSE:HPQ), Red Hat (NYSE:RHT), Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOG), VMware (NYSE:VMW), Cisco (NASDAQ:CSCO), Dell etc. to just name a few.

Meanwhile, research firm IHS expects enterprises to spend $235 billion on cloud architecture and related services by 2017, up 35 percent from the $174 billion it expects to be spent this year and triple the $78 billion spent in 2011. This year alone, cloud spending is pegged to rise 20 percent from $145 billion last year. Source: Enterprise Cloud Spending to Soar to New Heights in Quest to Drive Greater Business Success.

In a recent Wall Street Journal article published on March 4th with the title: New Cloud-Software Firms Take Off, Bryan Schreier, a partner at Sequoia Capital, which has financed many cloud software companies such as Dropbox Inc. and RingCentral (RNG) was quoted: "The market is large enough that you can sell into one vertical…these companies have a long way to grow."

Indeed, the WSJ reported that: "the rise of niche providers could crimp the growth of big software makers such as Oracle (ORCL), SAP AG (SAP), Salesforce.com (NYSE:CRM) and International Business Machines (IBM), while presenting a larger threat to company-built software or programs from lower-tier players that have been slow to shift to the Internet."

Wells Fargo Securities analyst Jason Maynard was quoted in the same: "We believe there is a great white-space opportunity in delivering apps and infrastructure to specific industries and verticals." and in a recent report named "industry clouds" as one of the top 10 software trends of the year.

The WSJ concluded: "Historically, investors shied away from financing niche players because they thought the markets were too small. But in recent years these companies have taken off as the technology has become easier to use and cheaper, broadband Internet service has become pervasive, and customers are more open to using cloud software. Their business models are also attractive to investors, requiring customers to pay a low but recurring monthly fee."

The Opportunity

This article highlights a company that has developed a unique and revolutionary technology platform that can enable the migration to the cloud for software users and publishers; despite having quickly established itself and its technology among key industry players, it still offers investors the opportunity to enter at a valuation that is ridiculously low in comparison to its peers. Why does the opportunity exist? Contrary to many other companies, the firm's management has, as we will show in this article, been focused on efficiently and successfully executing its strategic plans instead of aggressively courting investors. Moreover, the company has largely escaped the eyes of Wall Street, to date, due to its primary listing being in Toronto (Sphere 3D was honored as a TSX Venture 50 Company in February) and only a secondary listing in the US as an OTCQX stock with very limited float. In the meantime, and rarely so, retail investors have the chance to grasp this investment opportunity in the early stages of the company's development and market recognition.

Sphere 3D Corporation (TSX: ANY.V) (OTCQX: SPIHF) is a unique virtualization technology solution provider that has described itself as a company that "solves the problems that previously were considered unsolvable". What problems are there in virtualization? Plenty! Sphere 3D allows most devices, independent of their size, resources or operating system, to access the full functionality of software programs and applications off from servers either in the cloud or on premise, absolutely independent of their operating system! A short video on Youtube presents Sphere 3d's solutions in a graphical way.

In fact, its Glassware 2.0(TM) technology makes it possible for today's devices to access yesterday's software; for today's software to run on tomorrow's devices all over the cloud, without sacrificing performance or security. The company has built their proprietary Glassware 2.0 platform from the ground up and specifically designed it to achieve application virtualization in the most demanding of circumstances. It can be deployed alone for application virtualization or utilized in conjunction with third party hypervisor-based virtualization deployments, for true end-to-end virtualization of physical infrastructure. For additional information visit sphere3d.com and have a look to the presentation made by Peter Tassiopoulos during the CANTECH Investment Conference held in Toronto last January.

Even virtualization industry heavyweight VMware (VMW), a company with a US$45 billion market capitalization, is still in the middle of piecing together a complete solution to deal with mobility and desktop applications. Their strategy has included acquisitions to address this; most recently buying Airwatch for $1.5 billion and Desktone for an undisclosed amount. On April 9th VMWare in an announcement stated "Customers want to transform their applications and enterprise desktops for the Mobile Cloud Era - extending access to employees on any device, from anywhere via a comprehensive solution that is simple, secure and cost effective", it is very important to point out that Sphere 3D could easily augment this approach.

In fact, the uniqueness of this technological solution and capability allows the management of Sphere 3D to execute the company's strategic growth plans at a truly remarkable pace, providing evidence not only of the credibility of its technology, but just as importantly, the management team's focus, dedication and ability to execute successfully. Due to such pace and significance of the developments we have chosen in this article to focus on its multiple significant achievements in just the last three months, as each of these achievements alone would arguably have taken less promising companies much longer than that!

11th February 2014 - Acquisition of V3 Systems
V3 is a technology leader in desktop cloud management solutions and the creator of the Desktop Cloud Orchestrator™ ("DCO") software, which allows administrators to manage local, cloud hosted, or hybrid virtual desktop deployments and the V3 Appliance; a series of purpose-built, compact, efficient and easy-to-manage servers. V3 has revolutionized the speed, ease of use, deployment and even the data center required for virtual desktop infrastructure (VDI). V3 is a VMware OEM embedded partner and has won numerous awards including a DEMOgod™ Award, Best Startup Company at the Best of INTEROP 2012, and a Utah Innovation Award in 2013. The V3 customer list includes the FBI, U.S. Department of Labor, U.S. Naval Academy, University of Texas, Blue Cross Blue Shield, and Children's Hospital of Alabama, among others.

Sphere 3D's CEO Peter Tassiopoulos noted "The V3 executive and Sphere 3D team share a vision of anywhere, anytime computing. Through this acquisition we will be able to accelerate on the delivery of that vision...Sphere 3D has been working closely with V3 for several months and commenced shipping of V3 Appliances to customers in January 2014. "Indeed, he also noted: "This acquisition will quickly add breadth to our overall product portfolio, and fast tracks our transition to commercial operations with accretive revenue from day one."

"Sphere 3D's ground-breaking work in virtualizing and delivering applications coupled with V3's high-performance virtual desktops and management tools will create a new product category within the end user computing industry," said V3 Systems' CEO Ric Lindstrom. "We expect this combination will offer a very compelling solution to customers in sectors such as financial services, government, education, and healthcare."

I highly encourage potential investors to browse the website of V3 (v3sys.com) which is loaded with information on the company and its technology, including very informative videos about the company and its products , however, for the readers that would like a quick first grasp, we would like to refer you to a public video testimonial by the CIO of a US Law firm with several offices of how unique V3 d eployments are. In less than three minutes it should leave even the most skeptical technology investors without a doubt about the potential of Sphere 3D's acquisition of V3 and the future of Sphere 3D: http://youtu.be/ntE7_EIdao0. More videos can be found as well: http://www.youtube.com/results?search_query=v3+systems

12th of February 2014 - Expansion of Partnership with Overland

Sphere 3D and its global licensee, Overland Storage (OVRL), a global provider of unified data management and data protection solutions across the data lifecycle, announced their intention to expand their relationship to include the V3 offering. Overland will embed some of Overland's award winning Network Assisted Storage (NAS) and Clustered Storage technology within its product suite to create new Software Defined Storage capability. For those who are not familiar with Overland, combined with its recent purchase of Tandberg Data Holdings, has shipped more than 1,000,000 units to customers around the world. This includes Fortune 1000 companies and organizations across sectors comprised of government, education and healthcare and life sciences companies.

The licensing agreement with Sphere 3D opens up truly global sales channels and established relationships of Overland and Tandberg Data, while the new products to be developed by Overland that will integrate Sphere 3D's technology into their data management solutions, will add a larger technological footprint as well.

Peter Tassiopoulos, CEO of Sphere 3D, noted: "I couldn't be more excited with the blended solution we have created with Overland and V3. Overland's massive global reach will enable us to create the market penetration velocity needed to deliver our solution through a proven and trusted partner."

24th February 2014 - Sphere 3D and UniPrint enter into an OEM agreement

Sphere 3D entered into an agreement with UniPrint (uniprint.net), a Division of ACCEO Solutions, Inc, and the leader in printing virtualization. UniPrint's award winning printing virtualization software allows simple and reliable follow-the-user printing, also known as secure pull printing. UniPrint printing virtualization allows for printing from any application (desktop, web or mobile) on any device (PC, tablet or other web-based device) to any printer (regardless of make or model, cloud-ready or not) and easy and reliable remote printing across platforms.

The VP of Software Development at Uni Print, Aaron Fu, noted: "When Sphere 3D presented us with the opportunity to be part of their innovative virtualization solutions, along with V3 Systems and Overland Storage -- we were excited to incorporate our technology into their suite of virtualization building blocks...UniPrint adds efficient printing for both remote and local operations to Sphere 3D's unique VDI solutions which are designed to future proof legacy apps, extend the life of the PC and even mainframe apps for enterprise. We look forward to growing with Sphere 3D in the future."

For those that require a hint on how relevant printing is in virtualization, just Google it and sees the complexity that just got solved.

14th March 2014 - Sphere 3D announces appointment of VP of Global Sales

Sphere 3D managed to convince Stoney Hall, a former Partner Alliance Manager- Healthcare and Life Sciences of Dell Inc. to join Sphere 3D as the new Vice President of Global Sales. Sphere 3D noted that: "With almost twenty years' experience in sales, Mr. Hall is well known as an influential, dynamic and experienced sales executive who has effectively leveraged teams and partnerships to consistently exceed revenue expectations. He has proven himself as a leader who can provide direction in business growth, strategic planning, sales and marketing.

Peter Tassiopoulos, CEO of Sphere 3D commented: "Stoney is a technically sophisticated, results-driven, and seasoned senior executive…In just his first few weeks since joining the team at Sphere 3D he has been instrumental in creating effective strategies to ramp revenue, capitalize on growth opportunities, and support our channel partners." Indeed, the first immensely positive effects of Mr Hall's hiring started to come to shareholder's attention less than three weeks later in the following landmark development.

3rd April 2014 - Sphere 3D Teaming up with Dell to integrate the Sphere 3D Glassware 2.0 platform and its Desktop Cloud Orchestrator with Dell DRIVE Plus

Sphere 3D announced that it teamed with Dell to integrate the Sphere 3D Glassware 2.0 platform and Desktop Cloud Orchestrator ("DCO"), from recently acquired V3 Systems, with Dell DRIVE Plus. Notably, the Dell DRIVE Collaboration includes not only Dell, but also Red Hat (RHT), Intel (INTC) and VMware , all technology giants in their own right. This announcement was not only a huge sign of the technological solutions that Sphere 3D offers, but also put its name alongside multiple players with multi-billion dollar market caps.

"Desktop Cloud Orchestrator and Glassware 2.0 software drop-in appliance solutions can be deployed in conjunction with other DRIVE partner technologies," said Stoney Hall, VP Global Sales, Sphere 3D. "Together these technologies enhance end-to-end compute capabilities of virtualized end user environments while simplifying their management."

To give readers an adequate picture of the opportunity that this collaboration represents, it has to be stressed that Dell's Healthcare IT revenue in 2013 was US$2.9 billion. In the US, Dell Leads Gartner's Healthcare Information Technology Services Provider Rankings: 2013 marked the third consecutive year Dell has ranked No. 1 in the healthcare rankings, which are based on annual revenue. Dell has a 20-year legacy as a leader in healthcare IT, providing broad capabilities, including electronic medical records (NYSE:EMR) cloud and disaster recovery services, cloud clinical archiving and mobility solutions. Already more than 2,000 hospitals and 30,000 physicians worldwide rely on Dell for IT support, benefiting from Dell's full-service, end-to-end IT solutions. The Dell Cloud Clinical Archive is managing more than 85 million clinical studies and more than 6 billion diagnostic imaging objects, and supporting more than 800 clinical sites in the industry's largest vendor-neutral hybrid cloud for medical imaging.

What is most important to highlight in this context is that Dell, the technology leader in delivering healthcare IT infrastructure, decided to incorporate the technology of Sphere 3D along with major league partners; a fact that makes it indisputably clear to IT managers across industries and investors alike that Sphere 3D's unique technological solution, puts the company in the direct technological presence of multi-billion dollar companies!

14th April 2014 - Application for NASDAQ listing

In line with Sphere 3D's speed of progress the company announced that it has filed an application with NASDAQ OMX Group to list its common shares on the NASDAQ Capital Market. Peter Tassiopoulos, CEO of Sphere 3D noted: "We believe that applying for listing on NASDAQ represents another important milestone for the Company and will help increase liquidity while providing greater access for U.S. investors and institutions." This strategy is not only in line with Sphere 3D's progress, but also recent board appointments and having secured additional capital in March. In fact, in the same announcement Sphere 3D also provided an extensive update with a list of operational highlights of the recent past: Corporate Update, April 14th, which also mentions the expansion of the relationship with Corel, a software publisher with over 100 million active users worldwide. The Company further reported that in addition to the demonstration centre at the Company's head office near Toronto, Canada, it established two additional locations for existing and potential customers and partners to come and test drive Glassware 2.0™ and V3 appliances. Additional demonstrations sites in Europe and the U.S. are being set up. Most importantly, to the disdain of shorts or doubters, Sphere 3D has no intention of keeping its technology quiet and out of sight. I have personally attended some of its live demonstrations first hand with IT experts by my side.

In conjunction with its announcement to seek a listing on NASDAQ which will open it up to a whole new "sphere" (no pun intended) of institutional investors, the company also provided key financial highlights, providing a nice background for its NASDAQ application and its financial stability:

  • Estimated revenue for Q1 2014 is expected to exceed $1 million;
  • Cash and short term investments at the end of Q1 2014 are in excess of $7 million;
  • Total assets at the end of Q1 2014 are in excess of $20 million;
  • Completed a Convertible Debenture financing of U.S. $5 million on March 21, 2014.

Such is my confidence in Sphere 3D that I have taken the initiative to respond to a recent short article that contained allegations on management, that were very straightforward to explain. As the shorts cannot anymore raise doubt on the technology of Sphere 3D, due to its numerous partnerships, they have resorted to personal allegations on management which I was happy to address in my instablog: Marc Chang's Instablog.

The current value also provides an opportunity to take advantage of the short's attempts to "shake the tree" and to get out of its short position, before Sphere 3D achieves further milestones, which, if the past is any indication, will occur rather quickly.

Note that the shorts' position is precarious: I estimate that the number of shares shorted might be close to 20 times the average trading volume on the Toronto stock market exchange and they started to short this stock when ANY.V was trading at about $2 CAD. Consequently a short squeeze is not a far-fetched outlook here.

The sweet and short bottom line

With a unique technology solution that allows users to run any application or operating system remotely with minimum end user requirements, high profile partnerships, financial backup and a management team that keeps executing at an incredible pace, Sphere 3D is destined to become a major player in the billion dollar virtualization sector. With a current market capitalisation of less than US$ 150 million, opportunities do not come much more evident and promising than Sphere 3D.

Disclosure: I am long SPIHF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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