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ServiceNow Acquires Neebula Systems

Posted on Thursday, Oct 16th 2014

According to researcher ITSMU, the IT Service Management (ITSM) market was dominated by BMC last year which accounted for 40% of the market’s revenue share. HP came a distant second with 17% share and was followed by ServiceNow, which accounted for 12% of the market. TechNavio estimates that the global ITSM market will grow 7% annually over the period 2012 through 2016. Cloud-based ITSM vendor ServiceNow (NYSE: NOW) is growing their revenues at a much faster rate.

ServiceNow’s Financials
For the quarter ended June this year, ServiceNow saw revenues grow 63% over the year to $166.8 million. They ended the quarter with a non GAAP loss of $0.07 per share. The market had projected revenues of $161.5 million with a loss of $0.07 per share for the quarter.

Losses for the quarter continued to increase as ServiceNow invested in sales and marketing and research and development activities. Net loss per share has increased from $0.16 per share a year ago to $0.35 per share for the quarter. During the same period, sales and marketing expenses grew 76% over the year to $91.94 million. Research and development expenses increased 97% over the year to $35.4 million. ServiceNow remains focused on market expansion for now and is not so worried about mounting losses.

By segment, subscription revenues grew 65% over the year to $132.72 million and professional services revenues grew 56% to $34.03 million.

For the current quarter, ServiceNow projected revenues of $ $173 million-$175 million with an operating margin of 1%. ServiceNow does not project EPS figures. They expect to end the year with revenues of $668 million-$673 million. The Street was expecting revenues of $169.5 million with a loss of $0.03 per share for the current quarter.

ServiceNow Acquires Neebula Systems
To continue to expand offerings, ServiceNow recently announced the acquisition of Neebula Systems for an estimated $100 million. Neebula is known for their flagship product ServiceWatch, which helps automate discovery, mapping, and monitoring of IT-enabled enterprise services. The platform will help ServiceNow grow their ITSM capabilities. ServiceNow plans to integrate ServiceWatch into their IT Operations Management strategy that focuses on transforming the legacy system of component-centric management to a service-focused management system.

ServiceNow’s Product Upgrade
ServiceNow has also released their latest upgrade that comes with advanced features such as an enhanced custom application creation experience with service creator and form designer. It also includes new service automation products such as the Facilities Service Automation that routes requests to facility specialists and displays incidents on floor plans. Visual Task Boards help manage services and tasks in a more organized manner. The latest upgrade also includes more visualization tools for management such as Demand Management to consolidate IT requests and CIO Roadmap to help prioritize investment decisions on a timeline. Additionally, the tool includes the ability to collect and transform infrastructure events into alerts that automatically trigger service workflows.

Their stock is trading at $57.40 with a market capitalization of $8.36 billion. It touched a 52-week high of $71.80 in February this year.

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