Hello, and welcome to Protocol Enterprise! now: how ServiceNow insists everything is fine with its business (until it isn’t), how Intel is reeling from one of its worst quarters in years, and enterprise tech moves.
Vague predictions of ServiceNow
Sometimes even the least of deal makers have to recognize that bombastic rhetoric can only get you so far.
ServiceNow just took the increasingly common step of lowering its sales guidance for the year: $6.9 billion by the end of 2022 instead of the $7.03 billion it expected in April.
- Regardless of the circumstances, CEO Bill McDermott refuses to predict anything less than growth and success for his company. “We are hitting the accelerator through what is clearly a bumpy macroeconomic environment out there,” he told Protocol in an interview Wednesday.
But the perspective shows how quickly the environment has changed. Just a few weeks ago, the notion of declining sales at ServiceNow was unheard of: It was close to blasphemy to suggest there could be trouble ahead.
At its annual conference in May, ServiceNow ceremoniously raised its long-term forecast — which the company reaffirmed Wednesday as “rock solid” — and McDermott assured analysts and anyone else within earshot that ServiceNow is ahead.
- As economic conditions worsen, businesses begin to move forward with closing deals for more financial breathing room. Customer acquisition may also slow as potential buyers become wary about jumping into a big IT purchase.
- Slightly longer sales cycles contributed to ServiceNow missing subscription revenue targets for the quarter, according to McDermott, along with weaker demand.
- Couple that with a strengthening dollar, and the financial projections start to look even worse.
But slippage in demand is particularly troubling to ServiceNow. Executives, including McDermott and CFO Gina Mastantuono, insisted in every possible way in the last quarter that no one is waiting for the future. Even hours before downgrading forecasts, McDermott labeled his company an “all-time performer.”
But even McDermott, never one to miss an opportunity to be optimistic, is forced to accept the reality of the current market, albeit reluctantly.
- “We’re hiring, expanding and investing for the future,” he said during ServiceNow’s earnings call on Wednesday, emphasizing that the company is sticking to its long-term goal of reaching $11 billion in revenue by 2024.
- In the short term, however, things are different: “We are basically back to the guidance we gave at the beginning of the year,” he told Protocol.
- That’s McDermott’s way of saying things are worse — but maybe not as bad as they could be.
The about-face is a byproduct of McDermott’s showboat personality and the result of factors beyond his control.
- By the end of May, there were enough voices warning of a looming economic downturn to warrant questions about it from industry analysts.
- But instead of just acknowledging the point and giving some canned response, McDermott needed a show. He had to prove how different ServiceNow was from every other software company.
ServiceNow will probably be fine. It’s a trusted partner and the company’s message of IT automation and low code should be buzzwordy enough to attract corporate buyers.
- “We think the increasing penetration of newer product categories illustrates the top deals [ServiceNow’s] expanding reach into non-IT spending areas, while improving the strength of its growth profile,” Wells Fargo analyst Michael Turrin wrote in a research note.
- The company is also adept at upselling users on multiple products to increase deal size, which is critical during a recessionary environment when the costs of acquiring new customers rise.
But perhaps the episode is a lesson to other software CEOs on how quickly the market can turn on even the brightest growth stories.
— Aisha is counting (email | nervous) and Joe Williams (email | nervous)
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But how about the play, Mr. Gelsinger
Intel released a grim quarterly report card on Thursday, telling investors that the company’s all-important data center and AI business revenue fell 16% to $4.6 billion.
Intel said the poor results were mostly due to a weak economy, supply chain and inventory disruptions and “competitive pressures.”
“This quarter’s results were below the standards we set for the company and our shareholders,” CEO Pat Gelsinger said in a statement. “We must and will do better.”
The company’s third-quarter outlook doesn’t offer much relief: Intel said it now expects per-share earnings of 12 cents on revenue of $15 billion to $16 billion. Its stock fell 10% in after-hours trading.
Overall, Intel reported a second-quarter net loss of $500 million on revenue of $15.3 billion; revenue was down 22% compared to last year’s second quarter. The company’s gross margin fell nearly 21 percentage points to 37% — typical industry margins run 50% or higher, as has been the case at Intel for years. Both revenue and losses missed Intel’s own forecast and Wall Street estimates by a wide margin, according to data from Sentieo.
Revenue at the company’s PC segment — which has been Intel’s biggest for years — fell 25% to $7.7 billion, hurt by a slowdown in demand for consumer electronics. New contract manufacturing revenue fell by more than half to $122 million.
— Max A. Cherney (email | nervous)
Business moves
In the past week, Starburst, One Identity and CommerceIQ have added new C-suite members; executives jumped ship from Salesforce, Shopify and ServiceNow; etc.
David Freeman has been named CFO at Starburst. Freeman was previously VP at Nutanix and Zscaler.
Judith Platz has been named chief customer officer at SupportLogic. Platz was previously SVP of Salesforce support and VP of global support for MuleSoft.
Cathy Polinsky joined DataGrail as CTO. Polinsky was previously VP of engineering at Shopify and previously worked at Salesforce.
Sally Sourbron joined business travel management platform TravelPerk as chief people officer. Sourbron was previously VP of global people for Europe, Middle East and Africa at ServiceNow.
Kevin Gavin is now CMO of Backblaze. Gavin was previously CMO at Five9.
Mr. Raman has been named president of CommerceIQ. Raman is a former chief digital officer at Samsung and previously worked for Groupon and Amazon.
Mark Logan has been appointed CEO of One Identity. Logan previously worked for Emptoris, now part of IBM, and Attunity, which is part of Qlik.
— Aisha is counting (email | nervous)
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Thanks for reading — see you tomorrow!
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