Fidelity Discloses 10% Stake in Splunk (SPLK)

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					                                   Robert DeFrancesco’s
                           Tech-Stock Prospector
October 10, 2013

Fidelity Discloses 10% Stake in Splunk (SPLK)
Fidelity today disclosed a 10.2% stake in Splunk (SPLK, $59.22), a provider of
solutions to monitor, process and analyze machine data.

The money manager now owns 10.85 million shares, up from 8.6 million shares at
the end of June. Fidelity has been building its Splunk position this year, having
purchased 2.25 million shares in Q2.

Shares of Splunk, one of our 8 TSP Tech Disruptors for 2013, are up 104% so far this

The company went public in April 2012 at $17 a share and opened for trading at
$32. The post-IPO high of $63.77 was reached on October 4.

Discover the companies expected to benefit from The Internet of Things. Download
the October 2013 issue of Tech-Stock Prospector to your Amazon Kindle or Kindle
for iPad/iPhone reading app:

Here is part of our Splunk write-up from the September 2013 issue of Tech-Stock

Every quarter there are one or two earnings calls that stand out for their
bullishness. For Q2, the Splunk (SPLK) call was one of them for me. The company’s
solutions, used to collect and analyze machine data, continue to be adopted at a
rapid pace: Splunk’s revenue in the latest quarter rose 50% and more than 400 new
accounts were added. The company’s total customer count now tops 6,000 and
includes more than 200 of the Fortune 500.

An indication of tremendous positive momentum in the business, Splunk raised
fiscal 2014 (January) revenue guidance yet again, with the new range of $275
million to $281 million representing 40% year over year growth at the midpoint. At
the start of the fiscal year, midpoint guidance indicated growth of 33%. Some on
Wall Street are expecting a lot more guidance upside for FY14, as the high revenue
estimate of $289.5 million represents growth of 45.5%.
As of now, the main use cases for Splunk solutions are IT operations, app
management and security. These core markets account for about 90% of total
revenue, split about evenly among the three.

Security in fiscal Q2 (July) had its best quarter ever. Splunk now has roughly 2,500
security customers using its solutions to monitor for known and unknown threats.

Splunk’s approach to security involves applying pattern analysis to user activities
around the most sensitive business data. Customers can see real-time information
from firewalls, network devices, operating systems, databases and applications on
one timeline, which enables security teams to quickly detect and understand the
end-to-end implications of a security event. Splunk solutions watch for hard-to-
detect patterns of malicious activity in machine data that traditional security
systems may not pick up on.

Overall, the numbers show that Splunk’s customers are a satisfied bunch: the
maintenance renewal rate is 94% and about 70% of license bookings each quarter
come from up-sells into the base. The company is signing a greater number of
Enterprise Adoption Arrangements, which are larger deals (often multi-
departmental engagements) typically involving three-year terms. In fiscal Q2, 163
deals were worth $100,000+.

The company continues to expand its presence worldwide, with international
business in fiscal Q2 up 50%, driven by solid performances across Europe and Asia.
The company generates 21% of revenue from international accounts and is putting
additional resources inside countries where it has a presence in order to drive this
figure higher. Splunk’s biggest international challenge is getting critical mass in
geographies it’s already in.

On the earnings call, CEO Godfrey Sullivan, former CEO of BI vendor Hyperion
Solutions (bought by Oracle), talked about how Splunk is on the path to transform
itself into a multi-product company from one offering just a single solution. Proof of
this: Splunk is in beta with Hunk, a new software product that enables exploration,
analysis and visualization of data in Hadoop. Scheduled to ship before the end of the
year, Hunk gets dropped on top of a HDFS cluster and can be analyzing data within
an hour of the installation.

The cloud represents an important emerging growth segment for the company.
Splunk Storm, the on-demand offering, now has 300 customers, up from roughly
160 at the end of fiscal 2013. In the latest quarter, 18% of license bookings came
from term contracts. Look for Storm to continue to gain traction because the cloud-
based solution is easy to implement and manage.

For Splunk to take full advantage of its current business momentum, it must
continuously build out its sales force. The company now has 189 quota carrying
reps (up 15 from fiscal Q1) and plans to have 220 to 225 by year-end. Only about
half of its reps are fully tenured, meaning there is plenty of room for improvement
in sales productivity.


Read the October 2013 issue of Tech-Stock Prospector on your Amazon Kindle or
Kindle for iPad/iPhone reading app.

Here are some of the topics covered in the latest issue:

*Trend Watch: The Internet of Things
*Cisco Systems benefits from the smart grid build-out
*Machine-data analysis made easy with Splunk
*A chipmaker sees opportunity in embedded intelligence
*Can the big rebound in Yahoo shares continue?
*Why F5 Networks is attracting more Wall Street bulls
*Akamai Technologies ramps up its sales force for new growth
*How the latest WiFi standard helps Aruba Networks
*4 small-cap takeover ideas for Oracle
*Apple bulls get more optimistic about new product cycles
*Palo Alto Networks gains visibility into security demand
*Tableau Software brings data visualization to the masses
*Why some big investors like Ruckus Wireless
*Recent IPO Benefitfocus brings cloud disruption to health insurance
*Fidelity boosts its stake in beaten down Riverbed Technology
*Fortinet secures SDN environments in the cloud
*Deal Report: Fusion-IO takeover chatter surfaces again

Order the October 2013 issue of TSP here:

Tech-Stock Prospector Managing Editor Rob DeFrancesco has more than 20
years of experience covering the tech sector. He is a former senior writer with
Louis Rukeyser’s Wall Street., launched in 2003, is an investment-research service
focused primarily on the networking, storage, security, wireless and software
sectors. Annual subscription: $350.

For more information or to place an order, call 800-392-0998.

Description: Shares of Splunk--a provider of solutions used to monitor, process and analyze machine data--are up 104% so far this year. Splunk is one of our 8 TSP Tech Disruptors for 2013.