Ten Things You Should Know About Splunk And Its $125 Million IPO

Splunk Inc. filed for a $125 million IPO on Friday in what marks the first IPO in the rapidly growing Big Data technology space. Big Data technology refers to software that specializes in the analysis of massive amounts of structured and unstructured data. Splunk’s mission is “to make machine data accessible, usable and valuable to everyone in an organization.” Splunk produces software that analyzes operational machine data about customer transactions, user actions and security risks. The San Francisco based company provides IT and business stakeholders with analytics that enable them to improve project delivery, cut costs, reduce security threats, demonstrate compliance with security regulations and derive actionable business intelligence insights.

Founded in 2004, Splunk capitalized on the market opportunity for actionable analytics on data derived from increasingly complex and heterogeneous enterprise IT environments featuring corporate data centers, cloud based and virtualized application environments. Splunk’s software provides its users with a 360 degree view of analytics about enterprise operations by running against structured data sets as well as unstructured data that lacks a pre-defined schema. Here are ten things you should know about Splunk and its S-1 filing:

1. Splunk has over 3300 customers including Bank of America, Zynga, Salesforce.com and Comcast.

2. Splunk’s software can be downloaded and installed within hours and lacks extensive customization and professional services for setup. Splunk is currently developing Splunk Storm (Beta), a cloud-based version of its software that features a subset of its functionality.

3. Splunk recorded revenues of $18.2 million, $35.0 million and $66.2 million in fiscal 2009, 2010 and 2011, with losses of $14.8 million, $7.5 million and $3.8 million, respectively. Revenue grew at a rate of 93% for fiscal 2010 and 89% for fiscal 2011.

4. For the first nine months of fiscal 2011 and 2012, Splunk’s revenues were $43.5 million and $77.8 million, with losses of $2 million and $9.7 million, respectively. Revenue grew at a rate of 79% during this time period.

5. Splunkbase and Splunk Answers, Splunk’s online user communities, provide customers with an infrastructure by which to share apps and offer each other insights and support. Splunk believes that enriching these user communities constitutes a key component of its growth strategy.

6. More than 300 apps are available via the Splunkbase website. Over 100 apps were developed by third parties. Examples of Splunk apps include Splunk for Enterprise Security, Splunk for PCI Compliance and Splunk for VMware.

7. In fiscal 2011 and the first nine months of fiscal 2012, 21% and 24% of Splunk’s revenues derived from international sales. The large percentage of Splunk’s customers that are outside the U.S. means that the company is vulnerable to risks specific to international sales transactions related to global economic conditions, increased payment cycles and the additional costs of managerial, legal and accounting for international business operations.

8. The IPO filing cited the following analytics vendors as Splunk’s principal competition: (1) Web analytics vendors such Adobe Systems, Google, IBM and Webtrends; (2) Business intelligence vendors including IBM, Oracle, SAP and EMC; and (3) Big Data technologies such as Hadoop.

9. Godfrey Sullivan has served as Splunk’s CEO since 2008. Prior to Splunk, Sullivan was CEO of Hyperion Solutions Corp., which he helped sell to Oracle for $3.3 billion in 2007.

10. Three of Splunk’s key technologies are Schema on the fly, Machine data fabric and Search engine capability for Machine data. Schema on the fly refers to the ability to develop schemas that adjust to queries and relevant data sets instead of inserting data into a pre-defined schema. The result is a more flexible modality of tagging data that renders itself receptive to unstructured data sets that lack a well defined schema. Machine data fabric refers to the ability to access machine data in all its various forms. Splunk’s machine data fabric means that no data is left uncovered by its software. As noted in the S-1 filing, Splunk’s “software enables users to process machine data no matter the infrastructure topology, from a single machine to a globally distributed, virtualized IT infrastructure.” Search engine capability means that Splunk boasts a range of arithmetic and advanced statistical capabilities for searching and performing business intelligence analysis on machine data.

Splunk has yet to reveal the number of shares that will be offered as part of its $125 million IPO under the ticker symbol SPLK. Thus far, the company has raised $40 million in venture capital funding from August Capital, JK&B Capital, Ignition Partners and Sevin Rosen Funds. The IPO is led by Morgan Stanley. JPMorgan Chase & Co., Credit Suisse Group AG and Bank of America Corp. are also working with Morgan Stanley on the public offering. Rest assured that Splunk’s IPO will be watched very closely by all vendors in the Big Data space.