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.

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Citrix Systems Boosts OpenStack With Cloud.com Acquisition

On July 12, Citrix Systems announced its acquisition of Cloud.com, the open source Infrastructure as a Service (IaaS) cloud computing platform that enables enterprises to create private or public cloud environments. Although the terms of the acquisition were not widely revealed, TechCrunch reports that Citrix Systems agreed to purchase Cloud.com for somewhere between $200 and $250 million. Citrix’s acquisition of Cloud.com comes less than two months after disclosure of its plans to commercialize OpenStack with Project Olympus, a product that allows customers to create IaaS cloud environments that leverage the OpenStack operating system code. The addition of Cloud.com’s CloudStack platform to Citrix’s product line means that Citrix can now claim ownership of XenServer hypervisor, XenApp, XenDesktop, Netscaler cloud networking products and the forthcoming Project Olympus. The acquisition of Cloud.com is expected to bolster OpenStack’s position in the cloud computing space because Citrix now promises to promote OpenStack utilization through the three pronged channel of Project Olympus, CloudStack APIs for OpenStack and its corporate support of OpenStack as an open source solution in contrast to a vendor such as Eucalyptus.

As a result of the acquisition, all Cloud.com employees will become part of Citrix. Cloud.com will henceforth be branded as Citrix CloudStack and belong to Citrix’s new Cloud Platforms Group. The acquisition gives Citrix a cluster of high profile customers such as Zynga Inc., GoDaddy.com, Tata Consultancy Services Ltd., Nokia Oyj and South Korean telecommunications company KT Corp that used Cloud.com to create internal cloud infrastructures. A June 17, 2011 GigaOm post by Derrick Harris notes that Zynga used Cloud.com to create its internal Z Cloud alongside RightScale as a tool to manage the union of its Amazon EC2 public cloud and Z Cloud.

Zynga Pursues Mobile Growth Strategy with Acquisition of Five Mobile

Head upon the heels of its July 1 IPO announcement, Zynga announced the acquisition of Canadian mobile application development firm, Five Mobile on July 8. Five Mobile specializes in developing mobile applications for the iPhone, Android and Blackberry platforms. The deal marks Zynga’s 15th acquisition in 13 months, and represents an aggressive move to diversify from the Facebook platform and capitalize upon the increasing popularity of mobile platforms for gaming purposes. Zynga noted that “Continue Mobile Growth” constituted a key component of its business strategy in its July 1 S-1 filing as follows:

Words with Friends is one of the leading social game franchises on mobile platforms. We believe there is a large opportunity to extend our brand and games to mobile platforms such as Apple iOS and Google Android. We will continue to make our games accessible on a large number of mobile and other Internet-connected devices and invest in developing and acquiring mobile development talent, technologies and content. Our DAUs on mobile platforms grew more than ten-fold from November 2010 to June 2011.”

The acquisition of Toronto based Five Mobile gives Zynga access to customers, products, talent and a base for its expansion in Canada. Five Mobile’s founders, Ameet Shah, Jeff Zakrzewski, Oliver Tabay, and Troy Hubman, will all join Zynga as part of the team of the renamed Five Mobile entity called Zynga Toronto. Five Mobile’s Managing Partner Ameet Shah will direct Zynga Toronto and report to David Ko, director of Zynga’s mobile operations. Zynga’s acquisition of Five Mobile promises to change the dynamics of the competition for engineering talent between Toronto and Waterloo. For years, Waterloo served as the hub of the startup community in Ontario due to the presence of companies such as Research in Motion (RIM), maker of the Blackberry product line. RIM brought an estimated 9000 employees to Waterloo and created a ripple effect on related companies and tech startups in the city. Zynga’s acquisition of Five Mobile recognizes the talent based in Toronto and promises to transform the geography of talented technical labor in Ontario, particularly given the recent interest of global companies interested in startups in the mobile and social media space.

10 Things You Should Know About Zynga and Its IPO

Zynga, the social gaming company founded by Mark Pincus in 2007, hopes to raise $1 billion in an IPO that follows upon the heels of the LinkedIn and Groupon IPOs of the last few months. Zynga’s IPO is expected to offer 10 percent of its shares to the public at a valuation of $20 billion. Here are ten things you should know about Zynga and its July 1 S-1 filing.

1. Unlike Groupon, Zynga is profitable. The company reported $90.6 million in profit in 2010. In Q1 of 2011, Zynga reported an $11.8 million profit. Zynga’s 2010 revenues were $597.46 million. For the first quarter of 2011, its revenue was $235.42 million.

2. Zynga’s IPO features three categories of shares: Class A, B and C. Class A shares will be issued to public shareholders. Class B and C shares belong to senior executives and investors. CEO Mark Pincus owns all of the Class C shares. Pincus made almost $110 million by selling a percentage of his class B shares back to Zynga last March.

3. Zynga’s investors include Kleiner Perkins Caufield & Byers, Union Square Ventures, DST Global, Institutional Venture Partners (IVP), Foundry Group, Avalon Ventures, Google, Reid Hoffman, Peter Thiel, Andreessen Horowitz, Tiger Global and Kevin Rose. Key investors own the following percentages of Class B Shares: Kleiner Perkins Caufield & Byers owns 11%; IVP, Foundry Ventures and Avalon Ventures each own 6.1%; DST Global owns 5.8% and Union Square Ventures takes claim to 5.5%.

4. Zynga is the biggest developer of Facebook applications such as CityVille, FarmVille, Mafia Wars, Words with Friends and Zynga Poker. The company has 60 million daily active users on Facebook and more daily active users than the next 30 Facebook social game developers combined.

5. Zynga has the top two games in the word category for the Apple App Store for iPhone.

6. Zynga has 2000 employees that serve 148 million unique monthly users in 166 countries. Players create 38,000 virtual entities per second and spend 2 billion minutes a day gaming.

7. “Substantially all” of Zynga’s revenue derives from the Facebook platform. Any decisions made by Facebook that adversely affect Zynga’s gaming operations would have significant repercussions on its revenue stream.

8. Zynga sees its market opportunity in the context of: a) the growth of social networking; b) a culture of the “App Economy” whereby developers have access to social network platforms; and c) A “Free-to-Play” gaming culture that allows users to play games for free, thereby attracting a broader set of users and a richer ecosystem for social interaction within the gaming environment.

9. Zynga cites its cloud based technology infrastructure as one of its core strengths. Zynga uses Amazon’s EC2 platform as a testing stage for its applications before migrating them to its own cloud based infrastructure. The company’s cloud based infrastructure carries with it the ability to provision “tools have enabled us to add up to 1,000 servers in a 24-hour period in response to game demand,” according to its S-1 filing.

10. Notable challenges Zynga foresees include its dependence on Facebook, the small percentage of players that are responsible for company revenue, the challenge of developing quality games for mobile platforms and non-PC platforms more generally, and the difficulty of recruiting and maintaining world class talent.