Splunk's Transition

Good article from Foolish contributor Frank Dipietro on Splunk’s ongoing transition and why it might bring short-term volatility to the stock:

Investors have had three chances this year to hear Splunk’s (NASDAQ:SPLK) management talk about how the company is doing. I give management a lot of credit for realizing the changes they are making may negatively impact the company’s results in the short term and being willing to share that information with investors. Shareholders have been able to tune in to management’s words from an analyst day in January, a conference call following the quarterly earnings report in February, and a presentation a few days later at a conference. At all three events, management has talked about the transition underway in the company’s sales force and product direction.

Let’s dig in to what we’ve learned.

Read more at https://www.fool.com/investing/2017/03/31/splunks-change-of-…

This is a company I really want to learn more about and I liked how the article spells out the changes Splunk is making to its product offerings, its salesforce, its incentives for sales, and account/organizational restructurings.

Matt
MasterCard (MA), Nestle (NSRGY), PayPal (PYPL), and Verizon (VZ) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx

3 Likes

I sold all my Splunk holdings yesterday before I read this post regarding their transition. My reason for selling was based on my past experience with promoting certain IT products to executive management in an aerospace company.

These managers were not stupid (well, not all of them), but they did not have IT backgrounds. The more esoteric the product, the less likely they were to buy it irrespective of the glowing pro forma financials. They had a healthy skepticism about the ultimate ability of the product to produce the projected ROI. They’d seen it before several times. It was just another tarnished silver bullet.

Machine data analysis, however promising it may be remains pretty esoteric. I finally decided I was not going to wait any longer with this investment when there are better opportunities (IMHO) with any number of more easily understood companies and products.

I speculate that with a new sales strategy targeting higher levels of management, Splunk is going to find it very hard to convince these executives of their value proposition. My guess is that the “one step back” will be a very long stride which will take possibly more than just a couple steps forward to get back to even.

Most certainly, I could be wrong, it would not be the first time. But frankly I much prefer IT companies like Paycom. They have products with a value proposition that is easily understood by executive management because they directly support a vital business function. And their single database strategy makes it is easy to sell bolt on new modules with much of the supporting data already in place.

Just my take.

6 Likes

brittlerock,

Right on with your assessment.

The more esoteric the product, the less likely they were to buy it irrespective of the glowing pro forma financials. They had a healthy skepticism about the ultimate ability of the product to produce the projected ROI.

I run a large auto supplier company. I sat and listened to an IT consultant who specializes in software bundling. I listened for an hour, and the only thing I could think of is “get to the ROI. How are you going to save us money? How much effort will we need to put into this? When will I see the savings?”

I sure hope Splunk can succeed with their new approach.

DHeavy