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Splunk Stock Plunges as CEO Merritt Departs Immediately

Splunk's CEO Doug Merritt stepped down after six years on the job. He will be replaced by Board Chairman Graham Smith.
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Splunk  (SPLK) - Get Splunk Inc. Report shares plunged Monday, after the data analytics software company’s CEO Doug Merritt stepped down after six years on the job.

He will be replaced by Board Chairman Graham Smith, former CFO of Salesforce  (CRM) - Get salesforce.com, inc. Report, effective immediately. Investors often react negatively to sudden executive changes.

“Splunk has evolved significantly since I joined the team nearly eight years ago,” growing hugely, Merritt said in a statement.

“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.”

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Splunk on Monday traded at $136.14, down 19%, leaving the stock down 18% year to date.

The company also offered preliminary data showing revenue of $660 million for the fiscal 2022 third quarter ended Oct. 31. That would represent 19% year-on-year growth. The FactSet annual consensus called for $642 million. Splunk previously estimated $625 million to $650 million.

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Splunk sees annual recurring revenue of $2.825 billion, above the $2.817 billion analyst forecast and at the top end of the company’s prior forecast of $2.8 billion to $2.825 billion.

“While … Splunk didn’t beat its ARR guidance by as much as some others outperformed, Splunk is also materially larger than some of its infrastructure software peers,” Evercore ISI analyst Kirk Materne wrote in a commentary cited by MarketWatch.

“The results speak to the fact that the business is in a lot better shape than the multiple … implies.”