Splunk CEO Steps Down Sending Shares Falling

Data-analytics software maker Splunk saw its shares collapsing on Monday after the company’s CEO Doug Merritt stepped down.

Board chair Graham Smith will be taking over immediately as interim CEO. The company is currently looking for a new permanent chief executive.

Shares fell 18% after Wall Street learned the news, marking the day the third worst on record for Splunk and the sharpest decline since December.

Merritt had joined Splunk as a senior vice president in 2014 after stints at Cisco, PeopleSoft and SAP. It was in 2015 that 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.

KeyBanc analysts led by Michael Turits remarked that the CEO transition is an “additional concern” that the company is dealing with. Other concerns include the risks of increasing competition from public cloud providers. KeyBanc has the equivalent of a “hold” rating on the company.

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%.

The company’s stock has risen about 120% since Merritt became CEO, compared with 125% growth in the S&P 500 index over the same period. Merritt also kicked off the company’s migration to cloud-based software services.

According to the company’s press release, Splunk plans to find a new CEO with “a proven track record of scaling operations and growing multi-billion dollar enterprises.” During Merritt’s tenure, Splunk’s revenue has from $302 million in fiscal 2014 to an expected $2.58 billion for fiscal 2022.

Splunk will announce its official Q3 numbers on Dec. 1st. The preliminary financials boast total revenues of $660 million for the quarter ended October 31, 2021, with contributions from the company’s cloud division showing 75% year-over-year growth.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.