Godfrey Sullivan is on the cusp of hitting another potential home run for private investors in the market for managing the reams of data corporations sort through to gain competitive advantage.
Sullivan is CEO of Splunk Inc., a developer of enterprise data search and analysis software that on Monday, April 16, upped the expected price range for its initial public offering to $11 to $13 per share from an earlier range of $8 to $10. The San Francisco-based company, which is expected to be one of eight IPOs to launch this week, would raise about $176 million by offering 13.5 million shares at the top of the new price range.
Sullivan took the reins of Splunk in 2008, after the company he previously ran for six years, business intelligence software developer Hyperion Solutions Corp., was sold for $3.3 billion in 2007 to Oracle Corp.
Splunk, which has been referred to as the Google Inc. of the data center, has developed software that helps enterprises collect and index data, regardless of the source or format, and search and analyze the data quickly. The company claims to serve more than 3,700 customers, the largest of which include Bank of America Corp., Comcast Corp. and Zynga Inc.
"This company has great technology, big customers, lots of momentum and is run by guys who know how to create value," independent IPO analyst Tom Taulli said.
The San Francisco-based company, which filed to go public in January, was founded in 2003 and employs 463 people.
The market Splunk operates in is set to grow. The company's software addresses a part of what is often referred to as "big data" -- a catch-all term for the mountains of digital information generated by business applications, content created by people, and so-called machine data.
Splunk focuses on the last of these three areas. Machine data is produced by software applications and electronic devices, and includes the likes of call detail records, application log files and "clickstream" data from Web user interactions with sites. The data is created by everything from smart grids to RFID tags to networked medical devices, Splunk said.
Citing research firm International Data Corp., Splunk said the volume of big data will grow 45% from 1.8 trillion gigabytes in 2011 to 7.9 trillion gigabytes in 2015.
The company has latched onto that growth, posting revenue of $35 million, $66.2 million and $121 million in fiscal 2010, 2011, and 2012, respectively. However, it has never been profitable. It posted net losses in the past three fiscal years of $7.5 million, $3.8 million and $11 million, respectively.
Splunk also faces stiff competition from a wide array of big technology companies, including BMC Software Inc., Hewlett Packard Co., IBM Corp., Adobe Systems Inc., Oracle Corp. and Google Inc.
Splunk's largest shareholders are venture firms Sevin Rosen Funds and August Capital, which will each own 17.7% of the company post-offering. At the top end of the expected IPO price range, their stakes would be worth $214 million each.
JK&B Capital will own 15.2% of Splunk post-offering, while Ignition Partners will own 10.5%. Sullivan will own 7.1% of the company.
Morgan Stanley, Credit Suisse Group, J.P. Morgan Chase & Co. and Bank of America Merrill Lynch were the lead underwriters on the Splunk IPO, with Pacific Crest Securities, UBS Investment Bank and Cowen & Co. co-managing.
Splunk retained Jeffrey Saper and John Avina of Wilson Sonsini Goodrich & Rosati PC as legal counsel. Martin Wellington and Sarah Solum of Davis Polk & Wardwell LLP advised the underwriters.