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The New Face of Splunk: Great Expectations with Doug Merritt

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Doug Merritt to take Godfrey Sullivan’s seat

In the previous part of this series, we discussed Splunk’s (SPLK) fiscal 3Q16 results, which it released on November 19, 2015. In addition to announcing its fiscal 3Q16 results, Splunk also announced that Doug Merritt will take the position of CEO, following Godfrey Sullivan’s decision to step down from the position. Merritt is a former Cisco (CSCO) marketing executive who joined Splunk as Senior Vice President of Field Operations in 2014.

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Godfrey Sullivan was CEO of Splunk for seven years and will continue to be on the company’s board as non-executive chair. Sullivan joined Splunk in 2008. Under his supervision, the company’s $18 million annual revenues—from only 750 customers—grew to $174 million and more than 10,000 customers in fiscal 3Q16. The chart below shows Splunk’s quarterly revenues since fiscal 2Q15.

Splunk anticipates the SMAC revolution

Owing to the SMAC (social, mobile, analytics, and cloud) revolution, big data and Cloud have become two rapidly growing areas in the technology space, and both have played a significant role in Splunk’s growth. One of Splunk’s major industry competitors, Tableau Software (DATA), also reported double-digit growth in its most recent fiscal quarter, 3Q15.

In another Market Realist series, we discuss Salesforce.com’s (CRM) fiscal 3Q16 results, wherein once again the company rewarded its investors and shareholders with double-digit revenue growth and increased revenue guidance.

Fiscal 4Q16 and 2017 expectations

For fiscal 4Q16, the company expects revenues to reach the range of $200–$202 million, which would exceed analyst expectations of $198.3 million. For fiscal 2017, too, the company’s revenue expectations top analyst estimates, which forecast that the company will post $832.3 million in revenues. The company’s guidance for fiscal 2017 was ~$850 million as of November 19.

As an alternative to investing in Splunk directly, you might consider investing in the Vanguard Extended Market ETF (VXF) to order to gain exposure to Splunk. VXF invests 0.20 % of its holdings in the company.

In the next part of this series, we’ll take a look at why Splunk’s shares dropped after its 3Q16 earnings report despite its strong performance.

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