ServiceNow Bill McDermott Beats Profits on Currency Effects

Hello and welcome to Protocol Enterprise! Today: Why ServiceNow beat its already lowered Q3 guidance if you ignore (outlandish moves), how Mobileye fared on day one of its return to the public markets, and the continued power of defaults comes to security.

No owners, only spenders

ServiceNow fell short of its third-quarter revenue guidance by normal accounting standards, while lowering its full-year guidance on Wednesday. But like many companies reporting earnings this week, the SaaS giant was sensitive to currency impacts, and CEO Bill McDermott was pleased with its results.

ServiceNow reported subscription revenue of $1.74 billion for the quarter, a little under his projected $1.75 billionwhile forecasting revenues of $6.87 billion for the year, down from its previously lowered forecast of $6.92 billion in revenue in 2022.

  • In an interview with Protocol, McDermott’s explanation was that when adjusted to a constant exchange rate, the company was actually beating its forecast and Wall Street expectations for subscription revenue, gross profit and revenue. net with results of $1.83 billion, $1.51 billion, and $398 million, respectively. .
  • “You guide in constant currency, and you’re judged operationally by your performance in constant currency, which is why it’s a beat,” he said.
  • ServiceNow also posted the highest operating margins in its history at 26%, which McDermott was quick to point out is not adjusted for constant currency.

ServiceNow cannot control the macroeconomic environment or exchange rates, much of which was caused by geopolitical uncertainty in Europe. But the company remains mainly focused on the American market, with global expansion plans in the coming years to reach $11 billion in sales by 2024.

  • McDermott is, as usual, unfazed.
  • “We are built for this moment,” he said. McDermott has no plans to slow down, saying ServiceNow will continue to hire, stay the course with its follow-on M&A strategy, and double down on organic innovation.

But ServiceNow felt the need to make some changes to achieve its goals.

  • McDermott will replace founder Fred Luddy as chairman of the board, the company announced Wednesday. Luddy will remain on the board.
  • “I think it’s a sign of long-term commitment from Fred and I,” McDermott said.
  • Already, McDermott is considering making board appointments to accelerate the company’s future.
  • “We need to take bold steps: Japan, India, certain industry verticals, and there could be operators, given that we have a highly desirable board, who can strengthen us over time. time,” he said.

As McDermott takes an even firmer grip on ServiceNow, he will increasingly shape the company in his image.

  • Part of that image comes from being a accomplished salesman which remains optimistic, even when the numbers might suggest otherwise.

— Aisha counts (E-mail | Twitter)

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It is impossible to raise the dead. But Mobileye’s IPO on Wednesday demonstrates that the public company listing market has not yet lost all of its vital signs.

Mobileye stock had a strong first day, rising almost 40% to close at $28.97. The Intel-controlled company sold about $860 million worth of stock in the IPO and sold an additional amount $100 million to General Atlantic. He priced the issue at $21, a dollar above the upper end of the $18-20 per share he was hoping to get.

Intel CEO Pat Gelsinger was careful not to call Mobileye’s return to public markets a capital raise at an event earlier this week, instead portraying it as a move to move it to market.

There’s some truth to what Gelsinger says: the original reason Intel planned the IPO was financial engineering – to unlock for Wall Street the value of the fast-growing self-driving unit while the rest of Intel figure out how to fix years of dysfunction. Two separate stocks, but still one company (Intel still controls Mobileye).

Intel once hoped to bank a $50 billion valuation, but later revised that value down at 30 billion dollars before settling on the roughly $20 billion market value that she actually managed to achieve. For context, Intel bought the then-public Mobileye for $15.3 billion in 2017.

— Max A. Cherney (E-mail | Twitter)

Better defaults, please

If you heard one of CISA Director Jen Easterly’s keynote speeches last week, you might have noticed the emphasis on a certain message: the need for “secure” technology products. by default”. The most interesting element of this, at least to me, is its request for vendors to create software and hardware products that are less prone to vulnerabilities.

The message is also about multi-factor authentication, which Easterly called on vendors to offer as a default option during its keynote at the FIDO Alliance Authentication conference. But Easterly’s call to action for technology vendors at the Mandiant mWISE conference covered more than MFA.

“We’ve accepted this strange cultural norm where software and technology go out of line plagued by vulnerabilities,” Easterly told mWISE. “And I think we should expect more and really demand more from our technology providers.”

The reason, as she said at this conference, is not just that it would improve overall security (which of course it would). But, more importantly, security by default matters because “we have placed the onus on the less capable and less knowledgeable about the threat to defend themselves, as opposed to [on] technology providers,” she said during mWISE.

Ultimately, Easterly indicated that this “call to action for tech vendors to focus much more on security by default” will be a continuing theme over the coming year. It remains to be seen how this message will be received by suppliers, especially those for whom “the benefits of insecure products far outweigh the disadvantages” – like Easterly’s predecessor, Chris Krebs, said during Black Hat this year.

—Kyle Alspach (E-mail | Twitter)

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