Stocks for software company Splunk Inc plunged following the exit of its current CEO. Shares of the venture, which produces software for searching, monitoring, and analyzing machine-generated data via a Web-style interface, dipped by as much as 18%, the biggest decline it experienced since December last year.
It was reported that Doug Merritt, who has been with the company since 2014, is stepping down effective immediately after holding the chief position for almost six years. Board chair Graham Smith will stand as the temporary chief executive officer while the enterprise looks for a permanent replacement.
In a press release on Monday, the former leader said, “Splunk has evolved significantly since I joined the team nearly eight years ago, growing from $302 million in revenue in fiscal 2014 to nearly $3 billion in ARR in the third quarter of fiscal 2022. Today, Splunk is the data foundation for tens of thousands of customers around the world, empowering these organizations to turn data into doing, improve security, drive resilience, and unlock innovation.”
He added, “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—in particular, the Board is focused on identifying a leader with a proven track record of scaling operations and growing multi-billion dollar enterprises.”
On top of that, Truist analyst Joel Fishbein Jr. wrote, “While we are sorry to see Mr. Merritt go, we see now as an appropriate time to transition into a new phase for the company as they continue to seek growth at scale and transition to the cloud.”
It can be recalled that during his time as CEO, the company has shifted toward a cloud-based service, moving away from more traditional on-premises software. This, alongside the risks of increasing competition from other public cloud providers, impacted revenue and operating margins.
Nevertheless, Splunk reported $605.7 million in quarterly revenue in August, up 23% year over year. At the same time, cloud revenue was tallied at $217.4 million, which was up by 73%.
In addition to the news of Doug Merritt leaving the business, the business has also disclosed preliminary data, which shows revenue of $660 million for the third quarter of the fiscal year 2022, much higher than its initial estimate of $625 million to $650 million.
As such, the announcement came as a surprise as the business seems to be doing well from a financial standpoint. It also created a stir since the change in leadership came only seven months after the resignation of Tim Tully, Splunk’s previous chief technology officer.
Furthermore, it did not help that there was no apparent reason indicated for Doug Merritt’s sudden departure from the brand. All of these things combined have caused Splunk’s stocks to plummet.
To oversee and ensure a smooth transition, Doug Merritt will still have an advisory role with the business. This should allow the company’s board of directors to focus their efforts on finding Splunk’s next CEO.