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The Cloud

Box Tries to Escape the Curse of the Silicon Valley Midcap

The cloud company is stuck in a sales rut, and activist Starboard just walked in.

Aaron Levie, chief executive officer and co-founder of Box Inc. 

Aaron Levie, chief executive officer and co-founder of Box Inc. 

Photographer: David Paul Morris/Bloomberg

Even in Silicon Valley, it’s tough to be the middle child. Wedged between hot new startups and technology giants, midcaps must prove their mettle when the pace of growth dips and competition intensifies. Such is the dilemma of Redwood City, Calif.-based Box Inc., whose revenue growth lags those of its cloud-computing peers and is slowing, compounding investor concerns that the 14-year-old company has yet to turn a profit.

Chief Executive Officer Aaron Levie’s answer has been to diversify Box away from its roots as a single-product file-sharing provider and position it in the cloud content management market, with offerings to help businesses secure data and automate workflows. But he’s yet to show the strategy revamp is bearing fruit. Box’s shares are down more than a quarter since its 2015 initial public offering. Shareholder advisory firms have been raising concerns about the structure of the company’s board. And in the biggest blow to Levie yet, activist investor Starboard Value LP disclosed a 7.5% stake in Box—calling the shares “undervalued” in a September filing and saying it could seek changes, including business combinations, asset sales, and a board revamp.