Thoughts on Splunk's recent CEO transition

On November 15th, Splunk, the market leader in APM and security, announced that its CEO Doug Merritt will be replaced by the Chair of the Board, Graham Smith. "We determined now is the right time to transition to our next phase of leadership - in particular, the Board is focused on identifying a leader with a proven track record of scaling operations and growing multi-billion dollar enterprises.

We believe the conversation has been going on for a while for persistent weak performance, but the sudden announcement shocked the market nonetheless. The transition of CEO in the middle of cloud transformation will add a lot of uncertainty, plus Graham Smith is a "finance guy," and investors would feel more comfortable if the COO were named to CEO to lead the company through cloud transformation. The company also pre-announced the Q3 results, with Cloud ARR reaching $1.1B, growing 75% YoY.

It seems there is an apparent disconnection between Splunk's market-leading position and its valuation. Splunk owns the largest market share in the broad ITOM space. Their $2.8B ARR is more than DDOG and small players combined but trading at a significant discount. At $1B cloud ARR, the failing of the cloud transition is not very likely. Their early success in security and logging, cash flow generation capabilities, plus cheap valuation set up the stage for a potential turnaround-rerating story.

It's still worth highlighting the tightened competitive environment in APM, monitoring, and security space. At the current price, SPLK might also be taken out privately. We will keep a close eye on its cloud transition progress, organic cloud revenue growth, and changes in market share.

SAAS

Esoterica's statements are not an endorsement of any company or a recommendation to buy, sell or hold any security. For full disclosures, click here.

Get the most lucid takes on where things are headed

Articles and educational writing for smarter investing.

How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio
How to Build a Three-Fund Portfolio

Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification
Asset Allocation for Diversification

How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles
How to Measure Economic Cycles

What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP
What Is GDP

How we can work together

See Our Solutions

Next

Generation

Investing

©2020, Esoterica Capital LLC (“ESOTERICA”). All content is original and has been researched and produced by ESOTERICA unless otherwise stated. No part of ESOTERICA’s original content may be reproduced in any form, or referred to in any other publication, without the express written permission of ESOTERICA. The content is for informational and educational purposes only and should not be construed as investment advice or an offer or solicitation in respect to any products or services for any persons who are prohibited from receiving such information under the laws applicable to their place of citizenship, domicile or residence.



Certain of the statements contained on this website may be statements of future expectations and other forward-looking statements that are based on ESOTERICA's current views and assumptions, and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. All content is subject to change without notice. All statements made regarding companies or securities or other financial information on this site or any sites relating to ESOTERICA are strictly beliefs and points of view held by ESOTERICA or the third party making such statement and are not endorsements by ESOTERICA of any company or security or recommendations by ESOTERICA to buy, sell or hold any security. The content presented does not constitute investment advice, should not be used as the basis for any investment decision, and does not purport to provide any legal, tax or accounting advice. Please remember that there are inherent risks involved with investing in the markets, and your investments may be worth more or less than your initial investment upon redemption. There is no guarantee that ESOTERICA's objectives will be achieved. Further, there is no assurance that any strategies, methods, sectors, or any investment programs herein were or will prove to be profitable, or that any investment recommendations or decisions we make in the future will be profitable for any investor or client. Professional money management is not suitable for all investors. For full disclosures, please go to our Terms & Conditions page.