Tag Archives: splunk

Splunk continues to rock the stock market! (Q2’14 financial results)

BigDataBigBuildings.jpgWhile past revenue is never an indication of potential future revenue, stock market investors continue to place a solid bet on Big Data analytics software maker, Splunk.  In this article we will explore some reasons investors like Splunk so much, we will outline some potential investment risks and provide some comparison to other companies just to gain a little perspective on what Splunk has achieved in a fairly short amount of time.


What is the simple explanation Splunk from ones’ personal experience?

Splunk is a software product that I personally really enjoy using.  It’s easy to use, they offer free trials for various versions and they offer it the way that everyone can simply consume (on-premise or as-a-service).  In a nutshell, Splunk allows you a flexible, intuitive way to gather, organize and visualize all your Machine Data.  According to their website:

Using Splunk Software, you can:

  • Troubleshoot problems and investigate security incidents in minutes
  • Monitor your end-to-end infrastructure to avoid service degradation or outages
  • Gain real-time visibility and critical insights into customer experience, transactions and behavior
  • Make your data accessible, usable and valuable across your organization

splunk machine data

Splunk by-the-numbers

Let’s take a look at some of the financial numbers for ticker symbol SPLK (http://finance.yahoo.com/q/ks?s=SPLK+Key+Statistics) at the time of writing this blog (8/30/2013).  Note:  These numbers will certainly change so it will be interesting to see what happens.

              • Yearly Revenue:  $218.96 million
              • Gross Profit:  $177.52 million
              • Quarterly Revenue Growth (YoY):  53.8%
              • Profit Margin:  -14.77%
              • Shares Outstanding:  103.81 million
              • Current Stock Price:  $55.24 per share
              • Market Cap Valuation:  $5.73 BILLION

Now, some personal commentary on these numbers.  First, 53.8% YoY growth is absolutely impressive and this stands out as a key reason why stock market investors continue to buy shares in the Company.  Second, $177M profit on $218M revenue means that Splunk is in a high-margin market segment (Big Data) and is also executing well from a profitability stance.  An 81% gross profit margin is absolutely insane and unheard of.

While the growth and profit numbers are impressive it’s important not to get too far ahead of ourselves because there are real financial risks.  With all the good numbers I just described, you will notice that the Profit Margin listed above is actually -14.77% so you might be asking yourself ‘how can this be?’  Simply put, Splunk is aggressively investing in the future, and therefore, is less concerned about the short-term profitability of the Company and growth is the key objective.  When a software company like this is in growth mode they are doing things such as hire talented workers, execute many sales and marketing campaigns as well as invest in building more and better technologies.

The other number that is somewhat of a concern is the $5.73 BILLION Market Capitalization Valuation.  This is not to say that it’s undeserved, just that it should be justified.  Market Cap Valuation is based on a simple calculation of Shares Outstanding (103.81M) times Current Stock Price ($55.24) which results in $5.73B for Splunk as of today.  This basically means that at Splunk’s current Yearly Revenue of $218M it would take them roughly 26 years to achieve what the stock market has considered the ‘value’ of the Company.  While there are surely many other factors to consider when it comes to determining a company’s valuation, I just wanted to point out this startling number because it’s an indication of clear interest by investors in bright potential future of either the Company and/or the market segment itself.



Market Cap Valuation comparison to other industry icons

Just for fun let’s compare two long time industry icon companies and where Splunk ranks among the others from strictly a Market Cap Valuation standpoint.

One, Eastman Kodak Company.  You will know them as the famous photo film manufacturer founded in 1880.  They have admittedly fallen into crisis mode having filed Chapter 11 bankruptcy in 2012, but again, this is just for fun to compare Market Cap to give your perspective how the stock market investment community feels about these respective companies.

Eastman Kodak Company (EKDKQ) key statistics:

                • Yearly Revenue:  $3.97 billion
            • Shares Outstanding:  272.78 million
            • Current Stock Price:  $.05 per share
            • Market Cap Valuation:  $14.18 million
            • 13,000 employees

SPLK $5.73 BILLION versus EKDKQ $14.18 million in Market Cap Valuation.  Isn’t that amazing?  Also, notice that even on Yearly Revenue of nearly $4 billion the Market Cap is incredibly low.


Next, Federal National Mortgage Association (a.k.a. Fannie Mae).  Founded in 1938, Fannie Mae is a company at the heart of our financial system who provides securitized mortgage loans to other lending institutions.  Most long-term mortgage loans such as the 30-year can be traced back to FNMA in one form or another.

Fannie Mae (FNMA) key statistics:

            • Yearly Revenue:  $32.26 billion
            • Shares Outstanding:  5.74 billion
            • Current Stock Price:  $1.22 per share
            • Market Cap Valuation:  $7 billion
            • 72,000 employees

Even though Fannie Mae has a Yearly Revenue of $32.26 billion the stock market has this Company valued at less than one-quarter this yearly revenue number at $7 billion.

fannie mae


Market Cap isn’t everything but investors typically are forward-looking

There are many sorts of investors whether they are long-term (buy and hold stocks for years), short-term (hold for weeks or months) or even day-traders.  So this is not to say that Splunk is a good company simply because the overall investor community has priced-up their stock so high.  Neither is this to say that neither Kodak nor Fannie Mae cannot reclaim their once iconic status in the eyes of investors simply because of their respective low Market Cap’s.  However, high market caps and continually growing stock prices are fairly good indicators of a Company that is doing a lot of right things and Splunk seems to be hitting on all cylinders.


Is Big Data the next Big Thing?

In summary, when starting a business of any kind it’s critically important to choose the right market if you plan for impressive growth.  In reflection, Kodak made absolutely the right choice to enter the film business in the late 1800’s and was certainly most successful for many decades.  Also, Fannie Mae was one of the most profitable companies in the world when they were established in the late 1930’s to service the mortgage loan business and they, also, experienced quite prosperous times for many decades.  And, while this might be a truly getting ahead of ourselves I ask you, is Splunk (and the Big Data market segment in general) the next Big Thing?

Creating Indexes from high-value transactions (versus Machine Data only) for Splunk Big Data

Use Case:  In today’s business environment, more than ever, it’s simply not good enough to be average.  Organizations of all sizes have to strive to create competitive advantages, understand trends and gain better insight into operational efficiency.  One of the most useful techniques to accomplish these goals is to Exploit Big Data through analysis.  However, this is challenging due to the volume, velocity and variety of content that must be analyzed.  Image-only files are useless in data analysis.  Therefore, in order to take the all-important first step in exploiting all of your content is to apply indexes so that computer systems can properly begin to understand the information.

  1. Reporting:  Business executives are generally paid good money to make important decisions about the business and these decisions are often based on reports.  These reports are often compiled from various data sources such as spreadsheets, interviews with customers or employees and possibly other documents.  This method of gathering all this various data is not only time-consuming but it’s problematic due to the fact that the data is often presented in a inconsistent manner.  For this reason you will want to use a Big Data system such as Splunk where business executives and have instant access to sets of data from various sources that is real-time information and presented through dashboards or graphics that can clearly show trends or other information that is pertinent to the decision making process.
  2. Predictive analytics:  Historical reporting is fantastic to analyze information yet this information is typically in the past.  Imagine if you can proactively determine a trend or predict, with solid data, future events?  This is a major benefit of Big Data aggregation.  For example, given the right set of data you can probably predict where mortgage interest rates will increase or decrease in a particular geography.  You would use statistics such as current available housing inventory supply, real-time unemployment rates as well as possibly the latest transactions within a certain time period.  Also, using the same Big Data aggregation concept but for a completely different application is predictive analytics is in the field of Healthcare.  If you can feed enough Index information into a Big Data solution then healthcare providers can narrow down much quicker the proper diagnose on people with illnesses where this can enrich people’s lives.
  3. Business process improvement:  There is always room for improvement and this is especially true in the business world and the most effective way to effect positive improvement is through the visibility to business processes themselves.  Once you understand the process then you apply matrixes to these processes such as time needed to complete a task or steps needed to finish a project.  A Big Data solution such as Splunk is an ideal complement to the efficiency improving technologies such as ABBYY Data Capture with tangible return on investment through reduced labor costs associated with manual data entry and Box with highly effective collaboration where enterprise workers can get work done quickly and be overall more effective in their business activities.  Just by deploying a Big Data analysis system with Data Capture efficiency and Collaboration on mobile that is secure is absolutely one way to achieve better process improvement but just imagine all the possibilities that can be done with the data itself.  And it all starts by Exploiting Big Data with Indexes.
  • Automatic indexing of relevant data
  • Full-page for complete index
  • Touch indexing for structured data extraction
  • Reduces costs associated with manual data entry
  • Ability to analyze all data sets
  • Offers ease of use for high user adoption

Solution Description:   This solution might sound gaudy and complicated but it’s actually straight-forward and logical.  There are three basic concepts which are Index Creation (ABBYY technology), Index Analysis (Splunk) and secure Image Storage (Box).  We will use several technologies to create indexes for various reasons and then we will feed our Big Data system all these indexes so that this software can do what it does best.  The Big Data system allows administrators to easily aggregate all this data and then create dashboards, reports and other useful business intelligence tools.  So the process is quite logical:  Capture indexes for all sources including existing databases, paper documents and, of course, images and send all these indexes to Big Data.  Then send the images to Box for safe storage, easy access and effective collaboration.



System Requirements:

Note:  This is a software developer and systems integrator solution.  We are using Splunk as our Big Data aggregator in this solution because it is so easy to configure, yet extremely effective.  Splunk can only perform well when you can provide lots of “Index” information.  As seen in this graphic, “Index” is at the core for Big Data to even begin analyzing different data sets.

  1. Box account
  2. ABBYY FlexiCapture for Automatic Data Capture
  3. ABBYY Recognition Server for Full-Page recognition
  4. ABBYY TouchTo for touch indexing
  5. Splunk Big Data software (free download)


Configuration Steps (Complexity = Moderate to Involved):

  1. Start Splunk and review choose Add data
  2. Depending on the output type and format of indexes select the proper Splunk Add Data function
  3. Now connect Splunk to your data source(s)
    1. For example, maybe Recognition Service you might choose ‘From files or directories’ and as an option Preview data before indexing
    2. …and for FlexiCapture you might choose the ‘any other data…’ then ‘Consume data from databases’ because you output to a SQL database directly
    3. …and for TouchTo you might choose the ‘a file or directory of files
  4. After connecting all the index data sources to Splunk it is advisable to review the Splunk Manager options to familiarize yourself with all the various settings and configurations available
  5. Now that you have configured Splunk to utilize Indexes from your various Data Capture and Conversion sources, you will want to gather information contained within Box.  To do this a software developer would utilize the Box API (Application Programming Interface) to import data such as tagsget comments or get file info
  6. A complete list of all the Splunk Indexes can be viewed in Manager
  7. Once all the indexes have been aggregated within Splunk then organizations can truly realize the benefits of Big Data with detailed reporting, predictive analytics and/or improved business process via simple visual tools such asdashboards


Associated screen prints on this solution:

1.  Splunk architecture with Index at the core


2.  Start Splunk


3.  Add data


4.  Splunk add From files or directories


5.  Data preview


6.  Any other data…


7.  Consume data from databases


8.  Splunk add A file or directory of files


9.  Splunk Manager


10.  Splunk Indexes Manager


11.  Splunk dashboard


What do you think?  “Big Data” is still a relatively new idea and many use cases are just coming to light.  How can you imagine using Big Data?  The possibilities to innovate in this area are tremendous, do you have a story to tell?