Can Splunk Succeed Even if IBM and Oracle Sputter?

Splunk (SPLK) will release its quarterly report on Thursday, and in the year and a half since going public, the data-analytics company has seen a warm reception from investors, who've helped push its share price up steadily to record highs throughout the past eight months. But should Splunk see the recent weakness in revenue from industry giants IBM (IBM -0.35%) and Oracle (ORCL -1.62%) as an opportunity to penetrate more deeply into the big-data niche, or as a warning sign that growth in the area could be more limited than many expect?

Splunk has sought to help business enterprises gather and analyze crucial data in an attempt to reap value from that information. By doing so, Splunk hopes that its customers will unlock valuable information they can use to bolster their own business prospects, thereby creating buzz that could lead to more clients for the big-data company. But with so much competition in the space, including huge players like Oracle and IBM and other smaller companies as well, can Splunk stay ahead of the industry's growth curve? Let's take an early look at what's been happening with Splunk over the past quarter and what we're likely to see in its report.

Stats on Splunk

Source: Yahoo! Finance.

Can Splunk keep growing?
Analysts have had mixed views on Splunk earnings in recent months, cutting estimates for the quarters ending in October and January by $0.01 per share while boosting projections for next fiscal year by a penny per share. The stock has continued its impressive run, rising more than 25% since mid-August.

Splunk came out of the gates well during the quarter, with revenue for the quarter ending in July rising by half and producing a narrower loss than investors had expected. The company also raised its guidance for the full fiscal year, pushing revenue estimates up 3%-4% and pointing to new expansion efforts as helping to add hundreds of new customers to boost sales further.

The elephants in the room for Splunk, though, are large rivals IBM and Oracle, which have been going through growing pains trying to tap the full potential of big data. Oracle has seen its stock struggle as it makes the leap from its past software-sales business model to a more cloud-based subscription model, but it sees the long-term impact of doing so as positive for its overall revenue prospects. Similarly, IBM has successfully navigated the decline of the hardware business to avoid the fate that some fellow PC manufacturers suffered, but it now is dealing with falling revenue as it starts to hit limits in its private-cloud-computing business. Yet both IBM and Oracle plan to use big data not just as an end in itself but as a way to sell more comprehensive products to serve their clients.

In order to grow and improve its product-offering quality, Splunk has turned to strategic acquisitions. In September, the it announced that it would buy mobile-device analytics company BugSense. Splunk hopes BugSense will help it take data directly from mobile devices and allow cross-comparisons with data obtained from other sources to find similarities and contrasts that could provide business intelligence to clients.

The question going forward is whether Splunk needs to take the next step and help customers apply that information more directly to improve their business prospects. Newly public Rocket Fuel (NASDAQ: FUEL) is specializing in taking big-data analytics and using them to support advertising initiatives, essentially responding to take advantage of opportunities as they arise. By doing so, Rocket Fuel is attacking one niche that could give it an edge over broader offerings from IBM and Oracle. Splunk could follow Rocket Fuel's lead and develop areas of expertise of its own to drive growth.

In the Splunk earnings report, watch to see how the company specifically plans to grow going forward. By identifying and moving into particularly profitable niches, Splunk could go a long way toward avoiding the struggles that IBM and Oracle have faced.

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