Two of the most-anticipated IPOs that were expected this tech year are Box and Dropbox. There’s been plenty of buzz, but so far no honey. Neither company seems inclined to move quickly to raise its expected boatload of money.

Why? Most originators of startups can’t wait to cash in blocks of company stock they awarded themselves in the leaner times. Ditto venture capitalists who risked their money early, on the promise of a fat return from a public rollout.

And the sector was red hot… at least in the first quarter of this year. Tech IPOs grew 160% compared with 1Q13, and software investments hit their highest level since 2000.

Some analysts have attributed the delay to skittishness over a perceived softening of the market in the second quarter. A bunch of former tech darlings hit the skids after Box filed for its IPO on March 24. Workday, for example, was down as much as 30% but has since rebounded a bit and is now down 10% from its March 24 close; Splunk has shed more than 45%, and Cornerstone OnDemand is off 25%. Even Twitter sold off: it was down as much 37% from the March 24 close before clawing back to within 10% of that price in the wake of strong financials that were released in late July.

But the laggards might not want to sit on their hands for too long. There is plenty of competition emerging, and investors aren’t likely to bid up shares if they believe they’re looking at weakening companies.

Among the new rivals are names to reckon with. Google. Amazon.

To appreciate the budding battle in this sector, we have to understand what it is that these pre-IPO upstarts brought to the table in the first place. Essentially, they staked out a space for themselves in which no one else was yet operating, and they do more or less the same thing.

Dropbox is a file-hosting service that offers Cloud storage and file synchronization with an emphasis on the individual. Users create a special folder on each of their computers, which Dropbox then synchronizes so that it appears to be the same folder (with the same contents) regardless of which computer is used to view it. Files placed in this folder also are accessible through a website and mobile phone applications. It includes lots of web security and commenting features, and is known as being extremely user friendly.

Box is also about online file sharing and personal Cloud content management. It’s geared more toward businesses, especially giant ones like contractors GE and Procter & Gamble and can coordinate the work of tens of thousands of employees (it does offer a free Personal edition). It adds online document creation and editing. Users can invite others to view and/or edit an account’s shared files, upload documents and photos to a shared files folder (and thus share those documents outside of Box), and give other users rights to view shared files. The company has announced its intention to focus on selling its Cloud storage to specific industries, including health care, financial services, and education.

Trouble is, both of these companies look frothy even before they go public, especially if they’re expecting nosebleed-level market caps out of the gate. But in the hope of raking in profits on IPO day, private investors are making precisely that bet. Box raised $100 million in funding in 2013 and added $150 million in early July 2014. Dropbox has pulled in $350 million in equity funding and a further $500 million line of credit since the beginning of this year. Based on these latest rounds of funding, analysts have pegged Box’s valuation as high as $3 billion, and Dropbox’s at a staggering $10 billion!

“Our tank is full,” Dropbox CEO Drew Houston says. Mmmm, so it would seem.

The financials being used to justify these valuations seem sketchy at best.

Yes, the companies have lots of users. Box has over 34,000 paying organizations and in excess of 25 million total users, according to the IPO filing. Dropbox claims more than 4 million businesses on board (not all of which are paying customers) and better than 275 million users, according to company figures.

These are substantial bases, but they haven’t yet generated profits, at least with Box. Last year, it had $124 million in revenues, but a net loss of $168.5 million. As of January 31, it had $109 million in cash on hand but a deficit of $361 million.

We’re less certain about Dropbox, since its numbers are more closely held. But it appears that the company had revenues of slightly north of $200 million in 2013 (up from $46 million in 2011). It has not revealed what level of profit or loss that translated to.

Whatever their financial status, these two can’t help but be threatened by the intrusion of a couple of Internet giants into their territory, both of which have cut prices for services similar to what Box and Dropbox offer.

First up was Google, which in April of this year announced the merger of file-syncing services with its office suite, Google Docs, to create Google Drive. Drive will be searchable with Google technology, allowing capabilities other Cloud services lack. Documents and presentations can be shared and collaborated upon. And any file accepts comments, whether it be video, an image, or a PDF.

When you upload files to your Google account, you must convert them to Google’s file format to edit them online. You can create new docs in the Web interface, collaborate with other users in real time, and export the finished products to more standard file formats, such as .doc, .rtf, and .pdf.

“Drive is built to work seamlessly with your overall Google experience,” wrote Sundar Pichai, senior vice president of Chrome and Apps for Google, in a blog post. “You can attach photos from Drive to posts in Google+, and soon you’ll be able to attach stuff from Drive directly to emails in Gmail. Drive is also an open platform, so we’re working with many third-party developers so you can do things like send faxes, edit videos and create website mockups directly from Drive.”

Those suspicious of Google in general may question what the company might do with all the new data it will be storing. Google’s response: “As our Terms of Service make clear, ‘what belongs to you stays yours.’ You own your files and control their sharing, plain and simple.” But those Terms also grant the company the right to use your data for “promoting and improving our Services.” So it remains to be seen how much public acceptance Google will draw.

And now, the new bully on the block is Amazon, which in July launched Zocalo. Zocalo was developed in response to requests from Amazon Web Services (AWS) users to “provide an enterprise storage and sharing tool that was easy to use, allowed users to quickly collaborate with others, and met the strict security needs of their organizations,” according to Noah Eisner, Zocalo general manager at AWS.

Amazon touts Zocalo’s high points:

  • A secure tool to share documents, spreadsheets, presentations, webpages, images, PDFs, and text files.
  • Encryption of data in flight and at rest.
  • Consistent experience across PCs, laptops, iPad, Kindle Fire, and Android tablets.
  • Synchronization of files across devices to ensure information is available anywhere, anytime.
  • Feedback facilities for collaboration: users can request and manage feedback from others, and contributors can highlight any word, sentence, paragraph, or area of a document or file and leave detailed comments.
  • Email alerts for contributors and document owners about review activities and approaching deadlines.
  • Integration with existing corporate directories.
  • Flexible sharing rules, audit logs, and data location control for admins.
  • Fully managed service with central file hub.
  • Available with Amazon Workspaces and Amazon Web Services’ virtual desktops in the cloud.

Typically, Amazon can also undercut competitors’ price points. Amazon offers a 30-day free Zocalo trial, providing 200GB/user for up to 50 users. The service then costs $5/user/month, with 200GB of storage space per user. Amazon WorkSpaces customers get Zocalo free for up to 50GB of storage, and $2/user/month for up to 200GB of storage. This compares to 100GB storage rates of $5/month for Box, $9.99/month for Dropbox, and a ridiculous $1.99/month for Google Drive.

That’s a bidding war. It can’t bode well for the likes of Box and Dropbox. Profit margins are bound to thin as the fight heats up.

Naturally, users are motivated by more factors than just price. So if you’re about to dip your toe into Cloud services, you need to research exactly what you’re getting. Carefully compare features before choosing a provider.

But as an investor, should you consider either of these guys, when (and if) their IPOs finally happen? We think not. At Casey Extraordinary Technology, we’re averse to companies that IPO with sky-high multiples and little but hope to back them up. We look for more solid evidence of future price appreciation. If you’re interested in finding out just where we’re putting our money these days, take a 90-day risk-free trial run.