ServiceNow Stock Slides After CEO’s Economic Mood Comments

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Joseph F. Kovar

Investors lowered ServiceNow share prices by 14 percent on Tuesday after CEO Bill McDermott told CNBC’s Jim Cramer that there were some major macroeconomic headwinds despite his comments that tech companies is in a position to grow as businesses use technology to combat those headwinds.


ServiceNow’s stock price on Tuesday fell about 14 percent before recovering slightly in after-hours trading after CEO Bill McDermott’s cautious comment to CNBC about the economy.

This is despite optimistic comments McDermott has made about the tech industry where, he said, the mood is better than the business as a whole.

McDermott, who spoke with CNBC’s Jim Cramer on Cramer’s “Mad Money” program, said it’s important to realize that macroeconomic crosswinds are blowing hard.


“You’re at 41-year high inflation,” he said. “The dollar is now the highest in more than two decades. We have increasing interest rates. People are worried about security. You have a war in Europe. So the mood is not good. But there is no way other than to innovate and drive technology to your company. So you digitize your processes. You act faster, and in the end you win. “

Despite those macroeconomic winds, Cramer called the conditions McDermott described as a counter-cyclical situation, and said that instead of canceling contracts with companies like ServiceNow, Salesforce, SAP, or Oracle, companies should instead invest more in their technologies.

That’s absolutely true, and as a result many companies including hyperscalers are working very well, McDermott said. However, he said, businesses are changing their technology investment priorities.

“Companies first say, which platforms we want to bet on, and then how we stack the ranking of priorities because they’re limited in capacity,” he said. “So they choose the projects they want to follow. But there is a filter to all of this now, and that is quick return on investment. And if you can’t put an architecture in there that provides quick ROI to the customer, you’re likely to be put off or moved to the left side of the list as opposed to the right side you want to go to. ”

Cramer said the idea that technology is somehow redundant is wrong, and that analysts and stock traders are weaker in the market than tech company executives, and McDermott

The mood among investors is in fact worse than the headlines, he said.

“If you look at tech, automation is front and center,” he said. “If you have a business and you want to grow it or you want to run it better, or you want to transform your brand, you have to compete with technology. So automation is alive and well, and I think the prospects are for technology companies, especially those with very strong brands and architecture would be great. ”

Cramer asked why young portfolio managers seem to have forgotten that companies that do less before are actually investing more in technology.

McDermott said he sees some of the more experienced portfolio managers telling investors to move away from energy and commodities toward tech because tech multiples are in a really attractive range.

“But the main line is this: If you look at the world through the CEOs there, they have to deliver great experiences for their customers,” he said. “They need to entertain their employees on all relationship issues, not just bonuses. People care a lot about cultures today. And you can’t build a great culture without serving your employees with those once important.And ultimately, you have to change, and you have to do it on the fly.So tech will be front and center in it all.

In the world of B2B, business ventures are very powerful, McDermott says.

“Of course, you can see the headwind of the dollar today against well -known technology brands,” he said. “You saw it, Jim. No one is more than running out of money today. And most likely, when you think about energy and the dislocation caused by the war in Europe and this re-prioritization I’m saying, you’ll see a longer cycle in Europe. We saw that. But it doesn’t fundamentally change the narrative that technology is the only way to break crosswinds and ultimately get to the other side.

ServiceNow declined to discuss McDermott’s comments.

However, in response to a CRN request for more information, the company responded via email that no company is in a better position to help customers adapt through the current macroenvironment than ServiceNow.

“Overall, the demand for digital technology remains stable. Our customers recognize the economic challenges but continue to indicate substantial growth in IT spending. Industry analysts rightly believe that enterprise software is remain a deflationary force as the industry benefits from secular tailwinds driven by digital transformation, cloud migration, and enhanced AI capabilities.

“We also hear from our customers that macro complexity is true, especially with inflation and foreign exchange currency. That’s why CEOs have no tolerance for multi-year projects with unlikely ROI. they redirect resources to technologies like ServiceNow that deliver results faster, ”the company said.

    Learn About Joseph F. Kovar

Joseph F. Kovar

Joseph F. Kovar is a senior editor and reporter for storage and the non-tech-focused channel beats for CRN. He keeps readers up to date on the latest issues related to areas such as the data life-cycle, business continuity and disaster recovery, and data centers, along with related services and software, while highlighting some of the major trends affecting the overall IT channel. He can be reached at [email protected]


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