Splunk Sees Dominance In Cloud Business With $1 Billion SignalFx Buyout
Software firm Splunk registered better-than-predicted figures for the second half and announced it was buying cloud monitoring company SignalFx to the tune of $1.05 billion, Splunk's biggest acquisition so far.
Doug Merritt, chief executive officer of Splunk, disclosed that the acquisition will allow them to offer clients a single-data infrastructure that can track cloud-based enterprise applications in real-time.
Splunk's purchase of SignalFx will involve approximately 60 percent in cash, and 40 percent in Splunk's common shares. Both parties expect the deal to be signed middle of next year.
In a media release, Splunk said that the merger of the two companies will give software programmers and infotech developers a system that will allow them to observe the flow of data as it happens, and help them "cut costs, boost revenue and enhance customer service."
SignalFx is tech solutions provider engaged in real-time cloud tracking solutions and predictive algorithms and analysis. The combination of the two firms, Splunk emphasized, will allow make them a stronger player in the cloud technology and give them the better capability and broader reach in their cloud monitoring operations.
In terms of figures, the digital data operating systems company posted a net decline of $100.8 million for the current quarter, or 66 cents a share. Splunk's non-generally accepted accounting principles gains were pegged at 31 cents a share on $518 million sales, advancing 34 percent from the same period in 2018.
Prior to the merger offer, SignalFx had earned $179 million in revenue, Crunchbase reported. The company's investors include Andressen Horowitz, General Catalyst, CRV, and Tiger Management Global. According to Splunk CEO Doug Merrit, data powers modern enterprises, and the purchase of SignalFx "puts the company (Splunk) in position to be a leader in monitoring at a massive scale."
The acquisition of SignalFx will also bolster Splunk's presence in the application monitoring market and challenge tech giants like Dynatrace and Cisco AppDynamics, which became publicly-listed companies this month.
On Wall Street, analysts were projecting sales of 12 cents a share on $489 million revenue. Stocks of Splunk climbed over 7% during extended sessions, Wednesday.
The company also hiked its revenue guidance for the fiscal year to $2.4 billion, bigger than its previous outlook of $2.2 billion and better than market predictions of $2.16 billion. Splunk also clung to its operating margin estimate of 15 percent in the current quarter.