INTERVIEW: ServiceNow CEO Sounds Off About Offerings, Earnings

His company's IPO was successful, but no picnic

   

When cloud operator ServiceNow (NYSE:NOW) came public in late June, it marked the first tech IPO since Facebook (NASDAQ:FB) pulled off its offering in late May. And ServiceNow has performed just a bit better, as NOW shares currently are trading around $30 — 66% better than their IPO pricing of $18.

ServiceNow develops applications to help automate IT operations. The space includes mega players like BMC Software (NASDAQ:BMC), CA (NASDAQ:CA) and Hewlett-Packard (NYSE:HPQ), but ServiceNow’s cloud strategy is eating up market share. In the latest quarter, revenues nearly doubled to $56.8 million.

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I recently had a chance to talk to the company’s CEO, Frank Slootman, a veteran of the tech industry. Slootman took Data Domain public in 2007, then sold the company a couple years later for $2.4 billion to information technology firm EMC (NYSE:EMC).

Slootman sounded off about a few things, including IPOs and the road to profitability. Here are the highlights:

IPOs Are Tough Right Now: “A great company can go public any time,” Slootman said, but in the current environment, investors are only interested in top-notch operators. While ServiceNow’s standout technology and massive market opportunity were vital, Slootman pointed out that his prior success with Data Domain also was key in getting investor interest.

Roadshow: Slootman skipped Europe. “It would have taken too much energy,” he said. “Our focus was on the US.” He also said the investor presentation was more condensed when compared to the one he gave for Data Domain. With the ServiceNow pitch, he focused on the company’s disruptive platform and how the business has scaled. “Investors want to know that margins will increase as the revenues grow,” he said.

Losses: ServiceNow currently isn’t profitable — but Slootman actually views this as a good thing for an early-stage company. “If a company is growing quickly and there is a profit,” he said, “then the CEO is probably doing something wrong. You want the focus to be on growth — and speed is critical.”

Tom Taulli runs the InvestorPlace blog IPOPlaybook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned securities.


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