Posted on Tuesday, Jun 2nd 2015
A 2014 IDC report estimates the Big Data and Analytics market to grow to $125 billion globally during 2015. Growth in applications that incorporate advanced and predictive analytics, including machine learning, is expected to accelerate during the year. These apps are estimated to grow 65% faster than apps without predictive functionality. Billion Dollar Unicorn player Splunk was set up in 2003 to deliver in this market.
Big Data analytics software solutions provider Splunk (NASDAQ: SPLK) is already gearing for this growth. Splunk’s tools help organizations make sense of data collected through data sources including mobile phones, PCs, and other devices. Their machine-to-machine data analytics software helps in identifying bottlenecks in software applications and data networks as well as detect security breaches in information networks. Last week, Splunk announced their quarterly results and their performance outpaced market expectations.
For the second quarter, Splunk saw revenues grow 46% over the year to $125.7 million, significantly ahead of the market’s forecast of $118 million. Net loss of $0.01 per share was also better than the Street’s estimated loss of $0.03 per share.
By segment, license revenues grew 40% over the year to $71.9 million. Maintenance and services revenues increased from $34.6 million a year ago to $53.8 million for the quarter.
Splunk forecast the current quarter’s revenues at $138 million-$140 million, above the Street’s forecast of $136 million. They expect to end the year with revenues of $610 million-$614 million, above market expectations of $603 million.
Splunk’s Expanding Market Reach
Splunk is expanding their market presence by reaching out to the SMB segment. They have traditionally looked at organizations with over 5,000 employees, but are now looking at smaller customers. FBR Capital markets values the global small-business analytics software market opportunity at $5 billion-$7 billion.
To cater to this market, they recently released Splunk Light, a machine-to-machine data analytics tool specifically designed for smaller organizations. Splunk Light is priced at $75 per month and allows up to 5 users to access the tool. Consumers looking to purchase the tool don’t need to go through a sales call and can directly download the software from the website. Splunk’s average deal size thus far has been around $40,000-$50,000 annually. A sale of the Light version will bring in a comparatively meager $900 a year, hurting their average deal size overall. But Splunk is hoping that the increased presence in the SMB segment will continue to keep competition at bay.
The market is very pleased with Splunk. They continue to remain the market leader in the machine-to-machine analytics segment and are pushing that lead by modifying their pricing strategy as well. Earlier this year, they introduced the option of purchasing unlimited enterprise licenses independent of data volume. They are hoping to increase the adoption of their machine data analytics through the move and get more organizations to transition to Splunk.
Their stock is trading at $71.07 with a market capitalization of $8.9 billion. It touched a 52-week high of $74.88 in February last year. Among the Billion Dollar Unicorns, Splunk is one that is thriving!
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.
This segment is a part in the series : Billion Dollar Unicorns
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What is Okta's Inorganic Growth Narrative?