![]() ![]() The IT operations analytics market crossed $1B in sales during 2014 and is forecasted to grow at a CAGR of 19.34% to $ 2.5B by 2019. Over the next three years, it's mission critical that Splunk continue to maintain its leadership position within IT operations analytics and capture the growth opportunity that lies ahead, which could mean sacrificing some GM. The divergence between the Street's expectations and actual GM performance could create buying opportunities conversely, if GM performs as expected, future sales growth could be adversely impacted. Additionally, while Splunk's leadership and some of the Street's analyst are currently calling for an inflection point of GM, I see GM continuing to decline on higher maintenance and service expense, primarily because of continued investment in salary and benefits meant to augment future sales. Splunk's GM is at the upper end of the range for software vendors and investors' concern about GM is overblown as the company is investing in staff to support sales that are forecasted to grow at 41% in FY17 and 36% in FY18. To put the GM in perspective, ( CRM) has a gross margin in the mid-70s, Workday ( WDAY) is in the high 60s, VMware ( VMW) is in the mid-80s, Akamai ( AKAM) is in the mid-60s, and F5 Networks ( FFIV) is in the low-80s. ![]() ( NASDAQ: SPLK) provides software that enables institutions to monitor, search, analyze and visualize massive streams of real-time and historical machine data (big data) coming from a variety of sources.įollowing Splunk's Q2 earnings release, investors expressed concern about the company's declining gross margin, in Q2 - 79%.
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