Splunk CEO Doug Merritt Exits After $1B Silver Lake Investment
‘We do not think the news this morning is overly surprising given the multiple business model changes at SPLK [Splunk] over the last 2+ years and the recent (June ’21) investment by PE firm Silver Lake,’ analyst firm BTIG wrote in a report issued Monday.
Doug Merritt resigned Monday as Splunk’s president and CEO effective immediately less than five months after Silver Lake invested $1 billion into the data platform giant.
The San Francisco-based vendor tapped longtime Salesforce CFO and current Splunk board chairman Graham Smith to serve as the company’s interim CEO as the board begins its search for Splunk’s next permanent chief executive. Merritt joined Splunk in 2014 as senior vice president of field operations, was promoted to CEO 19 months later, and will remain in an advisory role to ensure a smooth transition.
“As the Board and I considered how to best position Splunk for long-term success and continued growth, we determined now is the right time to transition to our next phase of leadership,” Merritt said in a statement. “In particular, the Board is focused on identifying a leader with a proven track record of scaling operations and growing multi-billion dollar enterprises.”
Splunk’s stock plummeted $31.83 (18.97 percent) to $136.08 per share in trading Monday afternoon, which is the lowest the company’s stock has traded since July 19. The company also stated preliminary third quarter results Monday, with year-over-year revenue projected to increase 19 percent to $660 million. That beat analyst firm BTIG’s quarterly revenue projection of $640 million.
“We think the CEO transition will likely pressure shares near term as the headline of an interim CEO … adds a new layer of uncertainty to the story,” BTIG analysts wrote in a report issued Monday. “That said, we do not think the news this morning is overly surprising given the multiple business model changes at SPLK [Splunk] over the last 2+ years and the recent (June ’21) investment by PE firm Silver Lake.”
Smith has server as a member of Splunk’s board since 2011, was promoted to chair in 2019, and will retain his chair responsibilities while serving as interim CEO, with ex-Lam Research CEO Steve Newberry becoming Splunk’s new lead independent director. As interim CEO, Splunk said Smith will focus on investments and priorities that ensure continued customer and cloud transformation success.
“As a long-tenured director with significant experience in scaling cloud businesses, Graham [Smith] has the expertise and acumen to lead Splunk as we conduct a search for the company’s next CEO,” Newberry said in a statement. “We are fortunate to have a leader of Graham’s caliber to help ensure Splunk continues executing its strategy and creatin value for our stockholders.”
Splunk experienced a sales slowdown amid the COVID-19 pandemic, with revenue in the fiscal year ended Jan. 31, 2021, falling to $2.23 billion, down 5.5 percent from $2.36 billion a year earlier. The impact was most pronounced later in the company’s fiscal 2021, with sales tumbling 5 percent, 11 percent and 6 percent in the fiscal quarters ended July 31, 2020, Oct. 31, 2020, and Jan. 31, 2021, respectively.
“Any executive anywhere that says the pandemic hasn’t affected them is either delusional or not truthful,” Doug Merritt told Forbes in a November 2020 article about the impact of the COVID-19 pandemic. Under Merritt, Splunk has been transitioning from a perpetual license sales model to a subscription sales model for its software.
“Since his appointment as CEO in 2015, Doug has led Splunk through critical product and business model transformations, which have enabled the company to become the leading data platform across security, observability and IT,” Smith said. “With the proven success of our ongoing cloud transformation and our team’s strong execution, we are confident that Splunk is well-positioned for its next phase of growth.”
Merritt’s departure caps off a number of changes in Splunk’s top management ranks in a little more than a year. In April senior vice president and CTO Tim Tully left Splunk to join a venture capital firm. In May Splunk hired AWS database executive Shawn Bice to fill the newly created post of president of products and technology.
In September 2020 Susan St. Ledger, then Splunk’s president of worldwide field operations, left the company to take a similar post at identity and access management tech developer Okta. At the time Splunk promoted several executives including Christian Smith to chief revenue officer and John Sabino to chief customer officer. And in April of this year Splunk hired Teresa Carlson, previously the head of AWS’s public sector business, as president and chief growth officer.