[elefont2]

Okay, let's do that thought experiment. Set Sales and marketing expense (Currently $171 million) to zero. So, they would be making $2.3 million a year in profit.

But you can't have your cake and eat it too. Without sales/marketing, you can't expect any growth. And expectation of future exponential growth is the trigger for these very high tech company valuations. Without that growth, I would value it like a blue chip company.

The average P/E ratio of the S&P 500 is about 20 times earnings. That would put the valuation of the company at about $50 million - a far cry from what they want to value it at.

Or, if you do it by sales, the average P/S ratio of the S&P 500 is about 1.7 times sales. Which puts their valuation at about $210 million - still a far cry from what they want to value it at.

So, while they have a scalable and profitable business today, they don't have one which comes anywhere close to justifying their valuation outside the silicon valley bubble. Ergo, they better still be in the search stage.

[guiambros]

Average S&P 500 P/E is hardly a good proxy to evaluate a nascent, fast-growing, enterprise technology company. The "E" part of the ratio is still too small to matter.

Salesforce.com hit 6100x P/E in 2011. Facebook had 3500x P/E in 2013 (now at 100+). LinkedIn was over 950x until recently (now 770).

Bottom line: as any other IPO, the valuation is not a reflection of how much the company is worth today, but what the company will be worth in the future. That's why growth is so important for them, and building a successful sales team is the single most important thing for Box now.

They have the model, and it's proven scalable. Now they have to just execute it. Before everyone else.