Doug Merritt, CEO, Splunk
Scott Mlyn | CNBC
Shares of data-analytics software maker Splunk were down as much as 19% after the company said CEO Doug Merritt was stepping down and Graham Smith, its board chair, was taking over as interim CEO, effective immediately. Splunk is looking for a new permanent chief.
The stock move was on track to be the third worst on record for Splunk and the sharpest decline since December.
The leadership change creates more uncertainty for a company working to become viewed more like a cloud company than a seller of more traditional on-premises software.
Merritt joined Splunk as a senior vice president in 2014 after stints at Cisco, PeopleSoft and SAP, and in 2015 he replaced Godfrey Sullivan as Splunk’s CEO, who had taken the company public in 2012. Smith is a former chief financial officer of Salesforce who joined Splunk’s board in 2011.
The CEO transition is “an additional concern” the company is dealing with, on top of risks such as increasing competition from public cloud providers, entry into the observability market and the ongoing business model evolution, KeyBanc analysts led by Michael Turits, who have the equivalent of a hold rating on Splunk stock, wrote in a note distributed to clients.
During Merritt’s tenure Splunk has been shifting more toward providing its software as a cloud service, which has had impacted revenue and operating margins. Other enterprise software companies, such as Adobe, Autodesk and Microsoft have gone through similar adjustments. Splunk reported $605.7 million in quarterly revenue in August, up 23% year over year, while cloud revenue, at $217.4 million, was up 73%.
Splunk stock has risen about 120% since Merritt became CEO, compared with 125% growth in the S&P 500 index over the same period.
The coronavirus pandemic hurt Splunk, along with enterprise software providers such as IBM. The company had trouble collecting receivables, and customers hesitated to commit to larger deals and asked for payment concessions.
In September Okta hired away Susan St. Leger, Splunk’s president of worldwide field operations.