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Why Box may not be a hot initial public offering in the long term

Part 6
Why Box may not be a hot initial public offering in the long term (Part 6 of 8)

Must-know: An analysis of Box’s opportunities

Box’s opportunities

Box’s (BOX) opportunities include its ability to differentiate through value-add services. Also, there’s the large potential market for expansion and the ability to capture more business from existing customers.

Differentiation and possible positioning as premium provider of “enterprise content collaboration” services

While cloud-based file storage and collaboration in itself is becoming a service that’s increasingly commoditized, there’s an opportunity for Box to differentiate itself with best-in-class customer support, consulting and implementation services, and uniquely tailored enterprise solutions that other providers may not offer. If Box is successful in doing so, clients may experience high switching costs away from Box. Clients may also be willing to pay a premium for Box over its competitors.

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Large potential market for expansion

Technically, everyone who uses the internet, whether through a computer or a mobile device, is a potential client of Box. Currently, Box is positioned more towards enterprise use or at least that’s where it’s paying customer base is. The best upside case for Box given its current product offering is that it becomes the preferred solution for enterprise clients’ file storage and collaboration needs worldwide.

Ability to capture more business from existing users

Some enterprise clients may only use Box for specific departments or special-use cases. In these situations, Box has an opportunity to capture more of an enterprise’s business, and potentially serve all of its content storage and collaboration needs.

Potential acquisition target

Given that internet giants such as Microsoft (MSFT), Google (GOOG), and Amazon (AMZN) provide services that are similar to that of Box, it’s possible that Box could be acquired by one of these companies. To be an attractive acquisition target, Box would have to offer a strategic value-add (possibly through a critical mass of users or through strong features) and be offered at an attractive enough price. These large cap companies are components of exchange-traded funds (or ETFs) such as the SPDR S&P500 Trust (SPY).

Continue reading the next section in this series to learn about Box’s threats.

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