stock fell sharply Friday after the data analytics company disclosed that Chief Technology Officer
is leaving to become a partner at the Silicon Valley venture-capital firm Menlo Ventures.
Tully, who joined the company in 2017, will depart effective May 4.
“I’ve been fortunate enough to spot top talent and work with great technical leaders and entrepreneurs during my operating career,” Tully said in a statement. “And now joining the venture side, I’m excited to help grow and create transformational companies with the next generation of founders.”
Both investors and analysts appeared to be generally disappointed with the news. Splunk shares (ticker: SPLK) dived 7.5% to $137.27 in recent trading.
KeyBanc analyst Michael Turits responded by cutting his rating on the stock to Sector Weight from Overweight. He notes that the CTO’s departure comes at a tricky moment for Splunk, as the company is shifting its customer base from an on-premise software model to a cloud-based version of its software.
“While we believe operational risk around the transition is limited, we do think there is a lot riding on SCP [Splunk Cloud Platform] given years in development and the competitive need for a modern cloud-native platform,” he writes. “However, we see that risk heightened with the CTO transition.”
He sees a similar risk with the company’s rapidly growing “observability suite” software to monitor IT systems’ performance, which he notes was assembled from a group of five acquisitions over the past year. “We now see the risk/reward more balanced, with the CTO transition yet another variable added to the equation,” Turits writes.
Citi’s Tyler Radke, who has a Neutral rating on Splunk shares, likewise has some concerns about Tully’s exit during a volatile period for the company.
“We believe Splunk will search externally to replace Tully and look for a candidate with strong experience around cloud product development at scale, which could take some time,” he writes. “On balance, we see the departure as an incremental negative, and believe investors will view the news as a potential elongation of the transition/ongoing uncertainty.”
Evercore ISI analyst
isn’t too worried, given Tully is moving to a venture firm. “We believe this departure should be seen for what it is: a career pivot versus an issue with Splunk’s positioning in the market,” he writes. “This departure won’t help sentiment, but we do not believe it has anything to do with fundamentals and a lot of bad news is already priced into the valuation.”
Asked to comment on the departure, a spokesman for the company noted that “Tim Tully is making a career change by joining a well-respected Bay Area VC firm …as an investment lead focused on many of his favorite technologies: big data, analytics, AI/machine learning and enterprise hardware and software. This turn in Tim’s career reflects his passion for accelerating innovation and advising on the future of technology, as he’s done for thousands of Splunk customers and partners over the years.”
The spokesman also noted that “the vast majority” of the company’s product teams already report to two other senior vice presidents—Sendur Sellakumar, chief product officer, and Jeremy Rishel who runs engineer and is “responsible for all software development, testing, operations, infrastructure, and program management functions.”
Write to Eric J. Savitz at firstname.lastname@example.org