JASK Attacks Splunk in $6B Cyberthreat Data Market

Splunk is facing some serious competition from a startup that just raised $25 million from Kleiner Perkins and others.

The upstart is San Francisco and Austin, Tex.-based JASK, maker of a service that helps organizations analyze threats to their IT operations. And according to its CEO, JASK recently won a multi-million contract in a competition with Splunk and others.

Before getting into that upstart, let’s take a look at Splunk — which specializes in machine log analysis. Revenues derive from a combination of software licenses and Splunk Cloud, its SaaS platform which are used for application management, IT operations and security.

Splunk has been growing rapidly, losing lots of money — though generating positive cash flow; and has enjoyed a nice rise in its stock price over the last five years. Between fiscal 2014 and 2018, its revenues have grown at a compound annual rate from $300 million to nearly $1.3 billion; it has reported a net loss every year — in 2018 it lost $259 million; and its free cash flow has soared at a 45.2% annual rate to $242 million, according to Morningstar.

Since going public in April 2012, its stock price has gone up and down — but as of July 5, its shares had risen 19.5% in 2018 yielding a market capitalization of $14.4 billion.

In the first quarter of fiscal 2019, Splunk gave a mixed performance. On May 25 Splunk reported revenue that was greater than expected and a bigger-than-expected loss. Revenues rose 37.4% to $311.6 million nearly $14 million above the Zacks Consensus Estimate. Its non-GAAP loss of 7 cents per share was a “couple of cents wider than the Zacks Consensus Estimate as well as the year-ago quarter figure.”

Given its relative size, should Splunk be worried that it lost a big contract from JASK? I think it should be worried and so should investors in Splunk shares. (I have no financial interest in the securities mentioned here).