Eyeing IPO, Splunk aims to grow revenue 50 percent

BANGALORE (Reuters) - When Splunk was set up in 2004 to troubleshoot problems in IT departments, its founders didn't expect a global surge in data to set the company on a fast track to a stock market listing.

Chief Executive Godfrey Sullivan, who headed data analytics firm Hyperion Solutions before it was bought by Oracle Corp (ORCL.O) for $4.5 billion in 2007, said Splunk was gearing up to go public next year.

"We're training for it. We call it training for the marathon. We want to be ready by next year," he told Reuters in a telephone interview, though he said Splunk has not yet hired a banker to help out with the initial public offering process.

The company, which indexes and manages machine data from computers, servers and mobile devices, changed its name from the mundane Transactions Engine to Splunk -- inspired by "spelunking," an American term for caving, or pot-holing.

"We solve the problem of why it's so hard to find when and where things go wrong in IT infrastructure. We use a Google-like interface that makes it easy to search and navigate your entire infrastructure," Sullivan said.

Splunk is backed by four private equity firms: Ignition Partners, JK&B Capital, Sevin Rosen and August Capital. Together, they have $40 million invested in the company.

Among its 2,600 customers in 75 countries are Bank of America (BAC.N), Salesforce.com (CRM.N), AT&T (T.N), Facebook, Zynga and LinkedIn Corp (LNKD.N). No single client accounts for more than a tenth of Splunk's total revenue, which doubled to $66 million in its 2011 fiscal year ended January 31.

Sullivan said Splunk hopes to add 1,000 customers this year -- it already added 280 accounts in the first quarter.

Splunk, which competes with IBM's (IBM.N) Tivoli and Hewlett Packard's (HPQ.N) OpenView and ArcSight businesses, sells its products on both a subscription and a perpetual license basis.

The United States is the company's biggest market, but Splunk earns around a quarter of its revenue from its international business, which is growing faster than U.S. sales.

"I expect international revenue to rise about 5 percent a year for the next 2-3 years," Sullivan said.

Splunk expects at least $100 million in revenue in the current fiscal year.

The company has high margins like most software firms, a positive cash flow and a $2 million line of credit.

Currently, it employs 350 staff -- 125 of whom joined last year. It plans to hire 125 more this year, including a chief financial officer, as it prepares for the IPO, Sullivan said.

"Anybody who wants to be CFO can give me a call."

(Reporting by Sayantani Ghosh in Bangalore; Editing by Joyjeet Das and Ian Geoghegan)