6 ms·

This means their EBITDA now probably shows profitability (servers they own are amortizable [the A in EBITDA], where are AWS is expensed.) Edit: Amortization/De

• gordon_freeman 9y ago
  Good point. I always wonder how such accounting changes truly reflect the financial performance of the company. On one hand it's a lot of upfront cost to Dropbox with high risk too but all that won't show up completely if this cost is amortizable over the long run.
  • scirocco 9y ago
    With HPE Flexible Capacity they only pay for the HW they consume. Cloud-model on premise. https://www.hpe.com/emea_europe/en/services/flexible-capacity.html https://www.hpe.com/emea_europe/en/services/flexible-capacit...
• lobsterloga 9y ago
  Maybe but OpEx is tax deductible. CapEx is not.
  • CodeWriter23 9y ago
    CapEx is deductible over the amortization period.
  • qaq 9y ago
    I am pretty sure if they desire they can convert CapEx into OpEx.
    • toomuchtodo 9y ago
      Sure, if they sell the storage system to someone and arrange a leaseback.
      • qaq 9y ago
        and that someone can be their own subsidiary in a jurisdiction with dif. tax treatment
        • toomuchtodo 9y ago
          Can be within the same taxing authority. I've facilitated facility transfers and leaseback agreements in the US. Edit: Yes, you can't seize what isn't owned.
          • qaq 9y ago
            I would also guess you could also shield assets this way from lawsuits etc
          • tw04 9y ago
            You also can't silently seize what is owned. Which is, generally speaking, the bigger issue.
      • 0xbear 9y ago
        That's how Microsoft manages its campus real estate. :-)
        • dx034 9y ago
          Nearly every company does that. It's amazing how little many companies actually own. I've worked in offices where everything from building over furniture to even the plants was leased. The company ran with close to zero assets (services business). Pretty sure that this wouldn't make any sense if it wasn't for tax purposes.
  • mbesto 9y ago
    Huh? You deduct CapEx cost over the depreciation period (server hardware is usually 3-5 years). Not sure what you mean by "CapEx is not".
• btown 9y ago
  Actually, since the servers themselves are physical assets with a useful life, and indeed could be leased independently from the business model during that useful life, they'd be modeled as depreciation not amortization. But yes, EBITDA would be increased either way. Realistically, the valuation multiples on EBITDA for mature SaaS businesses are different from those for datacenter operators, and someone building a financial model for Dropbox would now likely take a blend of these this into consideration. So EBITDA is by no means the end-all be-all here. EDIT: And taxation is a different story altogether, as in either the cloud or own-hardware case, Dropbox can write off expenses or depreciation respectively.
• bernardlunn 9y ago
  This could have been the decision driver. It is also why investors increasingly look past ebitda to free cash flow which is harder to game.