Box IPO Filing Shows It's a Feature, Not a Company

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Updated from 9:05 a.m. to include line about profitability from the S-1 in the twelfth paragraph.

NEW YORK (TheStreet) -- Monday, cloud storage startup Box unveiled itself to the financial world, filing its S-1, as it gets ready to go public. That's all well and good, except it's not a company -- it's a feature, and likely always will be.

As the company gets set to debut on the New York Stock Exchange and raise $250 million or more from the filing, investors need to be acutely aware of the risks of the file sharing and content collaboration company, as it seeks to compete with larger companies, like Citrix , Microsoft , Google and others. The cloud computing and file hosting and sharing space is growing ever more crowded, and the Los Angeles-based company realizes that.

"With the introduction of new technologies and market entrants, we expect competition to continue to intensify in the future," the company noted in the filing. Not only did the company list the aforementioned publicly traded companies as competitors, but it also listed Dropbox, the other cloud computing company that's received quite a bit of attention, and is expected to go public later this year.

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By listing Dropbox as a competitor (which isn't news to anyone), the company has opened itself up for criticism that it really isn't a company, but more of a feature set of a larger company. In 2009, then Apple CEO Steve Jobs approached Dropbox and co-founder Drew Houston about buying the company for a nine-figure sum. Houston turned down the offer, and Jobs later avowed to go after their market, which Apple did, with the introduction of iCloud.

The company also lists parts of Microsoft  (Office365, SharePoint and Skydrive Pro, since renamed Onedrive), Google  (Drive) and Citrix (ShareFile) as competitors, thus continuing to press the thesis that Box is probably best suited as part of a larger company.

Box even says that it expects consolidation in its industry, due to fragmentation and the fact that there are low barriers to entry to its main market. "The market for cloud-based Enterprise Content Collaboration services is fragmented, rapidly evolving and highly competitive, with relatively low barriers to entry for certain applications and services. Many of our competitors and potential competitors are larger and have greater name recognition, much longer operating histories, larger marketing budgets and significantly greater resources than we do."

There were rumors earlier this month that HP was sniffing around Box, but tech Web site CBR cited a source close to Box saying the transaction would not occur.

The cost of storage is rapidly approaching $0, with Box recently giving away 50GB worth of free storage for iOS users earlier this year. That's not a secret to anyone who follows the storage industry.

"We offer users a free version of Box in order to promote additional usage, brand and product awareness, and adoption," the company said in the filing. "Our free offering allows users to invite anyone to collaborate on Box, enabling faster content collaboration across employees, vendors, clients, contractors and other parties while exposing more potential users to our solution and helping our solution grow virally."

What is concerning is that while only 7% of the company's 25 million registered users are paying customers, it's increasingly costing more to keep those paying customers, by selling them on additional services and features.