The recent acquisition of AppDynamics by Cisco has brought the application performance monitoring (APM) market to the forefront. According to IDC, the APM market was worth $2.6 billion in 2015. The market is led by Dynatrace with 15% share and New Relic (NYSE: NEWR) came in sixth with 6.2% market share. AppDynamics accounted for 5.5% market share. New Relic has traditionally focused on Tier II and Tier III applications for small and medium sized enterprises. But now, it appears to be changing gears.
New Relic’s Financials
New Relic’s third quarter revenues grew 43% to $68.1 million, ahead of the market’s forecast of $66.35 million. Net loss of $0.09 per share compared with the market’s forecast of $0.14 per share.
It ended the quarter with nearly 14,915 paid business accounts. The new customers added during the quarter included names like Bupa UK, Cox Enterprises, Freshdesk, Gannett, Morningstar, and Viacom International.
For the current quarter, it forecast revenues of $70.3-$71.3 million, with a net loss of $0.14-$0.16 per share. The market was expecting revenues of $69.3 million and a loss of $0.15 per share.
New Relic’s Enterprise Focus
APM market leader Dynatrace provides monitoring and root cause analysis to larger enterprise customers and deals with Tier I applications that account for about 20% of the total number of enterprise applications. New Relic, on the other hand, has focused on Tier II and Tier III applications for SMEs. But now, it is expanding its target market to bigger enterprises and is seeing strong traction.
As part of this focus, it has announced updates to the New Relic Digital Intelligence Platform. The updated platform allows New Relic to publish company-wide dashboards for enterprise deployments and delivers expanded visibility into the application performance monitoring module. Organizations will also be able to receive alerts for dynamic infrastructure.
The platform will assist developers and operations teams in asking iterative questions about application performance. It will allow them to receive intelligent alerts and create dynamic, real-time, company-wide dashboards that will be able to provide a holistic view of any number of business units or subsidiaries.
Last quarter, New Relic also announced its artificial intelligence offering called Project Seymour. Seymour is designed to deliver advanced AI and machine learning capabilities to help companies improve customer experience and the performance and availability of their digital initiatives. Seymour will help across processes ranging from discovery to diagnosis and prediction. It will be able to offer a news feed that will be customized based on the user’s roles and permissions and will display the trends and issues that they care about most. It will highlight issues and trends and provide users with a diagnosis of the problem and recommend a solution. The platform will also enable collaboration across team members and finally leverage its massive amount of data in the cloud platform to help predict and prevent future issues.
Additionally, New Relic announced an improved Infrastructure offering that is geared toward a new monitoring solution to provide deep, real-time visibility into a company’s dynamic cloud and hybrid infrastructure. The New Relic Infrastructure enables correlation of performance metrics and configuration changes to the infrastructure by processing, displaying, alerting, and analyzing all the changes and performance data required to manage and optimize cloud and hybrid infrastructures. Through the new offering, IT teams will be able to have a single source for live-state monitoring and change tracking of all their instances, easily examine inventory and any changes made to their instances via a real-time feed, and achieve faster detection and resolution times.
Cisco’s acquisition has spurred the market. It paid a hefty premium for the acquisition of AppDynamics and that is benefiting New Relic’s stock performance. Its stock is trading at $36.96 with a market cap of $1.95 billion. It touched a 52-week high of $40.13 in September last year and has recovered from the 52-week low of $23.45 it had fallen to in March last year.
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