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Splunk, Despite Messaging That’s ‘a Tad Bit Weak,’ Now a Strong Acquisition Target

Merger rumor

**Editor’s Note: Please click here for a recap of the biggest channel-impacting merger and acquisition news from February.**

Splunk‘s stock got a boost Thursday after an Argus Research analyst gave the company a positive outlook and said it could become an acquisition target for a larger enterprise software firm.

Channel Partners obtained a copy of the report by Argus’ equity research analyst Joseph Bonner, in which he says Splunk is an early-stage data analytics company with a strong technology base. Although its original focus was IT operations management, Splunk has expanded into adjacent product areas such as IT network security, he said.

Argus Research's Joseph Bonner

Argus Research’s Joseph Bonner

“We believe that the company still has significant room for growth in the rapidly expanding enterprise analytics software industry,” Bonner said. “Of course, much will depend on the company’s ability to provide technology that enables clients to efficiently index, analyze, and form actionable insights from an ever-increasing mountain of data. Splunk will also need strong execution to expand its customer base, up-sell additional products to existing customers, and boost its average selling price (ASP).”

Mike Jude, Stratecast/Frost and Sullivan research manager, agrees with Argus that Splunk could be pursued by a competitor.

“We are tracking it from the standpoint of infrastructure management,” he said. “This is an area that is starting to heat up as a market, since lots of things like cloud services and the Internet of Things (IoT) are becoming more common parts of the enterprise computing infrastructure. Splunk is a strong company and is well positioned with its product line to address most of these considerations. However, currently because of the fragmented nature of the analytics market, Splunk’s messaging is a tad bit weak. Nevertheless, Splunk is on the competitive radar screens of the largest market players and would make a good acquisition target for some of them; although there aren’t many that could consume such a large target.”  

Last week, Splunk announced it is acquiring Phantom Cyber, a provider of security orchestration, automation and response, for about $350 million. The deal should be final by mid-year.

Stratecast/Frost & Sullivan's Michael Jude

Stratecast/Frost & Sullivan’s Michael Jude

“Phantom Cyber looks like another ‘acquihire’ by Splunk, and will be folded into its security markets business (an ‘acquihire’ is an acquisition made to bring on the staff as well as the technology of the target company),” Bonner said. “We think that Phantom Cyber is meant to bolster Splunk’s already formidable security analytics and automation offerings.”

International expansion is another important growth opportunity for Splunk, as most of its European and Asia Pacific sales currently come from system integration resellers, he said.

“Splunk is looking to increase its international sales to between 30 and 35 percent of total sales from 26 percent currently,” Bonner said. “The company is also looking to extend its technology into other adjacent areas, as it has already done with enterprise security and IT service monitoring. Finally, Splunk is working to develop its ecosystem of customers, partners, and, just as importantly, application developers who can build customized applications on the Splunk Enterprise platform.”

Last week, Brooke Cunningham, Splunk’s area vice president of global partner programs and operations, spoke with Channel Partners about the company’s latest partner-program enhancements and accompanying goals for continued rapid growth.


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