Splunk makes a splash
FORTUNE — It’s no Facebook, LinkedIn (LNKD) or Zynga (ZNGA), but data analytics company Splunk (SPLK) is making a big splash on Wall Street. The San Francisco-based software provider officially went public Thursday morning, with a $229.5 million offering priced at $17 a share (well above its expected $11 to $13 range). The stock nearly doubled in value after it began trading, reaching $32.
Unlike recent social media IPOs, Splunk’s business is much more mundane — its software analyzes terabytes upon terabytes of machine-generated data. But there’s growing demand for so-called “big data” services, and Splunk has hit a sweet spot with IT departments that need to sift through a mountain of log files created by servers, applications and devices “talking” to each other. The company has about 3,700 customers, including some well-known brands like Salesforce.com (CRM), Geico and Macy’s (M).
Splunk isn’t profitable. The company launched in 2004 and brought in CEO Godfrey Sullivan in 2008 to prepare for its IPO. Sullivan, best known as the former CEO of Hyperion Solutions (a business intelligence company he sold to Oracle (ORCL) for $3.3 billion in 2007), has since ramped up hiring and opened offices. That’s cut into the company’s bottom line. And the company will likely need to keep spending heavily to hire more employees and stave off big competitors and startups entering the big data space. Then again, unlike some social media companies, Splunk actually has a growing roster of customers and a business model: It charges users according to the amount of data they need to analyze.
“We were surprised by the opening, that’s a big number,” Sullivan told FORTUNE in a phone interview on Thursday morning. “Investors are saying Splunk is the first company that’s come along and is making sense of machine data, and there’s a lot of enthusiasm.”
But Sullivan says the IPO is like “mile three in a marathon.” In addition to hiring an additional 200 engineers (which Sullivan says is harder than ever in Silicon Valley), the CEO says the company is working on building up its technology portfolio. And with cash on the balance sheet, it might start looking at making some acquisitions in the near future, especially to beef up its applications offerings.
Splunk is one of three enterprise tech IPOs slated for this week. On Friday Infoblox, a maker of network control software, and security products company Proofpoint are expected to start trading. And there are others in the pipeline: Cloud-based enterprise software provider Workday is another business tech startup expected to go public sometime this year. The growing demand for cloud, collaboration and analytics tools is making enterprise companies an attractive bet–while there are hundreds who don’t make it big there have been quite a few successful exits over the past few months, including Jive Software’s (JIVE) IPO and SuccessFactors’ $3.4 billion sale to SAP (SAP). The trend is not lost on Silicon Valley venture capitalists. Firms like Andreessen Horowitz and Kleiner Perkins Caufield & Byers are making some high-profile investments in enterprise tech companies that are suddenly, well, cool.
Selling analytics software directly to businesses isn’t nearly as exciting as consumer-facing tools that let you share photos of your cat or play online games. But, at least today, Wall Street doesn’t seem to mind.