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Sphere 3D Corp. - (NASDAQ: ANY) Positioned For Long-Term Growth: Delivering Unparalleled Leading-Edge Cloud Based Solutions For Business And Industry-Scale Applications

|Includes: Amazon.com, Inc. (AMZN), ANY

Summary

Sequential Growth shows promising results.

New product releases: first full integration cloud-based solution provider available in the market.

Unique Microsoft partnership.

(NASDAQ:ANY) Releases 2015 Q3 Earnings results:

Financial result highlights for the third quarter of 2015 are as follows:

  • Net revenue for the third quarter of 2015 was $18.8 million, compared to $1.5 million for the third quarter of 2014.
  • Product revenue for the third quarter of 2015 was$16.1 million, compared to $1.3 million for the third quarter of 2014:
  • Disk systems revenue was $10.1 million, compared to $1.3 million for the third quarter of 2014.
  • Tape archive product revenue was $6.0 million compared to none for the third quarter of 2014.
  • Service revenue was $2.7 million, compared to$0.2 million in the third quarter of 2014.
  • Gross margin for the third quarter of 2015 was 29.2%, compared to 37.1% for the third quarter of 2014. Non-GAAP gross margin for the third quarter of 2015 was 33%.

The CEO also noted at the beginning of the call that: "We believe we have positioned the company to drive revenue growth as enterprises shift to using ANY device, on ANY network, on ANY cloud, ANYwhere through our unique cloud-ready technologies like the Glassware 2.0™ platform and SnapServer® / SnapCloud™ products."

Sphere 3D is the only virtualization cloud company to offer migration, network, cloud backup and storage devices all available in one easily integratable solution.

Cisco Global Cloud Index: Forecast and Methodology, 2014-2019:

Forecast statistics provided by Cisco below clearly illustrate an industry-wide shift to companies and large corporations shifting their software needs to the public cloud. Sphere3D's unique position in conjunction with Microsoft's partnership will have the opportunity to provide large-scale solutions for the industry at large at very affordable prices.

This will represent recurring revenue for Sphere 3D once someone implements their solution in the public cloud. It could be said that Sphere3D is in the very early pioneer stages with regards to public cloud hosting solutions such as was Amazon (NASDAQ:AMZN) when it first started its online store paradigm.

Cisco Forecast Overview

  • Annual global data center IP traffic will reach 10.4 zettabytes (863 exabytes [EB] per month) by the end of 2019, up from 3.4 zettabytes (ZB) per year (287 EB per month) in 2014.
  • Global data center IP traffic will grow 3-fold over the next 5 years. Overall, data center IP traffic will grow at a compound annual growth rate (OTCPK:CAGR) of 25 percent from 2014 to 2019.

Data Center Virtualization and Cloud Computing Growth

  • By 2019, more than four-fifths (86 percent) of workloads will be processed by cloud data centers; 14 percent will be processed by traditional data centers.
  • Overall data center workloads will more than double (2.5-fold) from 2014 to 2019; however, cloud workloads will more than triple (3.3-fold) over the same period.
  • The workload density (that is, workloads per physical server) for cloud data centers was 5.1 in 2014 and will grow to 8.4 by 2019. Comparatively, for traditional data centers, workload density was 2.0 in 2014 and will grow to 3.2 by 2019.

Public vs. Private Cloud

  • By 2019, 56 percent of the cloud workloads will be in public cloud data centers, up from 30 percent in 2014. (CAGR of 44 percent from 2014 to 2019).
  • By 2019, 44 percent of the cloud workloads will be in private cloud data centers, down from 70 percent in 2014. (CAGR of 16 percent from 2014 to 2019).

Global Cloud Traffic

  • Annual global cloud IP traffic will reach 8.6 ZB (719 EB per month) by the end of 2019, up from 2.1 ZB per year (176 EB per month) in 2014.
  • Global cloud IP traffic will more than quadruple (4.1-fold) over the next 5 years. Overall, cloud IP traffic will grow at a CAGR of 33 percent from 2014 to 2019.
  • Global cloud IP traffic will account for more than four-fifths (83 percent) of total data center traffic by 2019.

Cloud Service Delivery Models

  • By 2019, 59 percent of the total cloud workloads will be Software-as-a-Service (NASDAQ:SAAS) workloads, up from 45 percent in 2014.
  • By 2019, 30 percent of the total cloud workloads will be Infrastructure-as-a-Service (IaaS) workloads, down from 42 percent in 2014.
  • By 2019, 11 percent of the total cloud workloads will be Platform-as-a-Service (NASDAQ:PAAS) workloads, down from 13 percent in 2014.

Source: http://www.cisco.com/c/en/us/solutions/collateral/service-provider/global-cloud-index-gci/Cloud_Index_White_Paper.html (page 2 of 44)

Information provided on the Earnings Call held on November 16th 2015:

is the only cloud-based migration solution partner with Microsoft. This means that any company or large-scale business wanting to migrate their existing Windows applications software to the public cloud will indeed look to Sphere 3D for integration solutions. As indicated in the Cisco statistics above, this industry shift has just begun and will continue to do so until 2019 at a significant adoption rate.

Sphere 3D indicated during the conference call, that only 3 to 5% of businesses wanting and needing to migrate to a public cloud based environment have already done so. This suggests that 95% of the current market has yet to be explored and that a large capex shift is to occur in the following years.

Sphere 3D is also looking to partner with other large companies to help the industry's shift to a public cloud based architecture.

To top it off, Sphere 3D offers pennies by the hour solution for Windows based applications to be hosted in the public cloud (including storage solutions). Their pricing scheme is unparalleled in the industry and has attracted the interest of many large ISPs who which to conduct business with Sphere3D.

Other key announcements:

1. On October 15, 2015, Sphere 3D co-hosted withMicrosoft a Worldwide Infopedia webinar where Exosphere, G-Series, and SnapCloud offerings on Azure were presented. Webinar attendees included Microsoft partners, Microsoftsalespeople, and end-user customers.

2. On October 15, 2015, Sphere 3D's Glassware 2.0 powered Exosphere™ on Microsoft Azure, which is its scalable and secure cloud application delivery solution targeted for 10,000 users and above, is now available through direct solutions sales engagement. Also, G-Series Cloud on Azure (powered by Glassware 2.0) is on track for general availability in the Azure Marketplace by the end of November 2015.

3. $33 Million in contracts announced over the following three years. It was said that 10-20 Million dollar contracts are now being seen as mid-level contracts for the company and that exposure to larger sized contracts has been available due to their relationship/partnership with Microsoft.

Institutional Investors:

Sphere 3D has 38,683,000 shares outstanding as of Nov 16th 2015. Approximately 30% of shares are held by institutions which illustrates solid support for Sphere3D Corp., given the early position the company currently sits in the industry. Table 1 below shows the top 5 holders for ANY.

Company Name

Shares Held

Cyrus Capital Partners, L.P.

6,097,087

Marathon Capital Management

712,911

Clinton Group Inc

687,570

Group One Trading, L.P.

60,579

KCG Holdings, Inc.

44,584

Table 1: Institutional holdings for Sphere3D Corp.

Disclosure: I am/we are long ANY.

Additional disclosure: I am a long-term investor who invests in growth stocks where I believe that large industry shifts will occur in the next 1-3 years.