Posted on Friday, Apr 13th 2018
A recent Market Research Future report estimates the global data analytics market to grow to $159 billion at a CAGR of 31% by the year 2022. Billion Dollar Unicorn club member Splunk (NASDAQ: SPLK) is counting on this growth as it continues to grow inorganically.
Splunk’s fourth quarter revenues grew 37% over the year to $419.7 million, ahead of the market’s expectations of $391 million. Total billings grew 44% to $622.8 million. Adjusted EPS of $0.37 was also ahead of the Street’s forecast of $0.34 for the quarter.
By segment, license revenue grew 33.5% to $254.3 million and maintenance and services revenue increased 42.7% to $165.4 million.
Splunk ended the year with revenues of $1.271 billion, up 34%. For the year, total billings grew 38% to $1.551 billion. Loss per share reduced from $2.65 a year ago to $1.85 for the reported fiscal.
For the current quarter, Splunk expects revenues of $295-$297 million, against the market’s forecast of $295 million. It expects to end the current year with revenues of $1.625 billion, ahead of an earlier guidance of $1.55 billion.
Splunk has been consistently adding smaller players to its portfolio to drive growth. Last quarter was no different. Recently, it announced the acquisition of Phantom Cyber Corporation, a leader in Security Orchestration, Automation and Response (SOAR), for an estimated $350 million. Palo Alto-based Phantom was founded in 2014 by Oliver Friedrichs and Sourabh Satish to bridge the security gap by enabling smarter, faster, and stronger enterprise security operations. Its platform manages the entire gamut of security services by offering prevention, triage, and resolution to improve productivity and effectiveness. The company had raised $22.7 million in funding from investors including Blackstone, Rein Capital, In-Q-Tel, Foundation Capital, and Kleiner Perkins. It was last valued at $100 million in a January 2017 round.
Globally, the security intelligence and event management (SIEM) software market is estimated to become a $6 billion industry by 2023, from $5 billion in 2017. The acquisition will help Splunk continue to build on its security offerings. During the current year, security-focused services offered by Splunk accounted for nearly half of its revenues.
Besides acquisitions, Splunk is also growing through partnerships. During the quarter, it announced new integrations with Amazon Kinesis Firehose and Amazon GuardDuty. The integration will help it deliver real-time analytics for joint customers across IT, security, Big Data, and IoT use cases. It also introduced Ask Splunk, an Alexa for Business, that will allow enterprise users to ask meaningful questions of data in Splunk and enterprise sources.
Questions for Splunk’s Board
Splunk appears to be on the right track to target the growing SIEM market. There are several other cloud players in the industry that it could be looking at. One such player is San Francisco-based JASK that claims that it is winning deals away from players like HP, IBM, and Splunk in 30% of its deals. Analysts believe that the comparatively lower cost of service coupled with ease of use is making buyers select JASK over these rivals. JASK is still comparatively small with $15 million in funding and estimated revenues of $10 million this year. I would like to know if Splunk is looking to acquire a player like JASK? If not JASK, what other players is Splunk eyeing? And should we expect price-erosion in the future due to competition from lower-priced players such as JASK?
Splunk’s stock is trading at $106.6 with a market capitalization of $15.35 billion. It had fallen to a 52-week low of $54.17 in July last year and had climbed to a 52-week high of $112.66 last month.
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns.
This segment is a part in the series : Billion Dollar Unicorns
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