Protocol Index: Splunk’s CEO on remote selling

What Matters Today

• 5:30 a.m. PDT: Another Thursday, another grim jobless claims release. A further 2.5 million people are thought to have filed for unemployment last week, while continuing claims for the week ended May 2 are expected to top 25 million for the first time.
• 1:30 p.m. PDT: Chipmaking equipment manufacturer Applied Materials reports earnings for its last fiscal quarter, which ended on April 26. That will offer an up-to-date look at how the chip industry's faring. Contract chipmaker SMIC, which reported earlier this morning, said "market demand and product mix are better than expected."
• 7 p.m. PDT: A slew of data from China will hopefully give evidence of a continuing recovery in April. Retail sales, which were down almost 16% year-on-year in March, are expected to be down just 7% in April. Industrial production, meanwhile, is expected to be slightly up year-on-year — excellent news for tech companies reliant on Chinese supply chains.

Layoff Watch

• Those Kickstarter layoffs became a reality: The company laid off 25 people, 18% of its workforce, with a further 30 taking voluntary buyouts.

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Today's News

As of 5:05 a.m. PDT: Nasdaq Futures: -0.66% | Euro 600: -2.21% | Nikkei: -1.74% | Hang Seng: -1.45%

OPPORTUNITIES

• Pexip shares jumped as much as 54% in its trading debut this morning, after a massively oversubscribed IPO.
• Amazon extended hazard pay until the end of May but said it would end in June.
• Tesla reached a deal with Alameda County on reopening next week.
• Cisco earnings for the last quarter beat estimates, as did its guidance for the current quarter. It said demand for its networking equipment and Webex software was up thanks to work-from-home measures.
• Deutsche Telekom said the pandemic would have a "limited" impact on its finances.
• PCB maker AT&S said revenue and profit would remain roughly stable year-on-year this quarter.
• Reddit is testing giving users Ethereum-based tokens when they contribute content.
• Live-streaming viewership was up 99% year-on-year last month, with Twitch racking up 1.6 billion hours of viewing. Music and performing arts content on Twitch hit 17 million hours watched, up almost 400% year-on-year.

THREATS

• Amazon asked Congress for a federal price-gouging law. Emily Birnbaum explains why on Protocol.
• New York City passed a bill capping restaurant delivery commissions at 15%.
• A new French law will fine social networks up to 4% of their global revenue if they don't remove pedophilic and terrorism-related content within an hour of it being posted. Other content has a 24-hour limit.
• President Trump extended the U.S. ban on using telecoms equipment from firms that pose a "national security risk," which in practice means Huawei and ZTE.
• Intelsat filed for bankruptcy as part of a "financial restructuring.'

DEALS

• Real estate data firm CoStar bought Ten-X's commercial real estate marketplace for $190 million.
• CRM startup Kustomer acquired Reply.ai for an undisclosed price.
• Edtech startup Quizlet raised $30 million at a $1 billion valuation.
• AMS, which supplies the sensors for Apple's Face ID tech, said it wants to raise $400 million in new capital. Its shares dropped on the news.
• New details emerged on the Uber/Grubhub deal: It is reportedly an all-stock offer that values Grubhub at around $6 billion.
• Uber is selling $900 million of bonds, which will reportedly yield 7.5%.
• Nokia bought back $162 million worth of bonds.

Interview

Can you close multimillion dollar deals remotely?

Some people are pretty convinced that travel is never coming back — not like it used to be, at least. The most widely-touted theory is that we've all realized how inessential most business travel is: Why fly around the world when you can just do your meeting via Zoom? According to Splunk CEO Doug Merritt, there's a simple reason: We're human.

• "I really miss being on planes and being with customers," Merritt recently told me. Remote meetings are "just not the same."
• That's affecting sales. While doing deals with existing customers is holding up OK, Merritt said, "for brand new customers, it's a different journey right now."

"We did do more than one $1 million+ transaction with a net-new customer during the past two months, so it's certainly possible," he added. But it's much harder. "You can do more when you're physically in the room … we need to be face to face," especially in something like sales.

• The death of business travel is "overplayed," Merritt said, though some meetings will probably move virtual — for instance, he said a meeting with a big investment bank that had been in the works for six months suddenly happened via Zoom thanks to fewer scheduling headaches.

There are other remote practices Splunk wants to embrace, too. "17% of the [employee] population have voiced interest in moving," Merritt told me, with people thinking about leaving cities to work remotely from their hometowns instead.

• "Close to 40% are saying: 'You know, I'm not so sure I need to go to the office,'" he said.

Aptly for the CEO of a data platform company, Merritt is an advocate of being led by data. "You've got to approach the data with 'what is it going to tell me,' not 'I make it tell me what I want it to tell me,'" he said. That's something he wants to see more of in this crisis: When the data changes, you need to have the "courage" to change your positions, too.

Overheard

• "There is a growing sense … that the recovery will come more slowly than we would like, but it will come and that may mean that it is necessary for us to do more." — Fed Chair Jerome Powell's speech yesterday led markets to drop on his pessimistic outlook.
• "Dealing with China is a very expensive thing to do. We just made a great Trade Deal, the ink was barely dry, and the World was hit by the Plague from China. 100 Trade Deals wouldn't make up the difference - and all those innocent lives lost!" — Trade war worries continued to amp up yesterday after President Trump's tweet, exacerbated by new comments this morning.
• "Elon Musk has no idea what he is talking about when he talks about AI." — Jerome Pesenti, Facebook's head of AI, was not shy about critiquing the vocal Tesla CEO.
• "We are preparing for the worst case scenario, which is potentially a very long winter." — Grab cofounder Tan Hooi Ling said the coronavirus is taking its toll.
• "This (rule change) will have a dampening effect." — An anonymous "industry executive" told Reuters that new Indian rules on foreign investment are hampering Xiaomi and Oppo's lending plans.

Diving Deeper

Those PPP rules keep changing!

The Small Business Administration released updated guidance on the Paycheck Protection Program yesterday, and it looks like good news for startups.

• "Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith," the guidance reads.
• That's because "borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity."

What does this mean? If a startup, with its affiliates, borrowed less than $2 million, it probably won't need to prove that it asked its investors, banks, and the like for alternative funding sources.

• But "with its affiliates" is still important. It's been previously clarified that, although having a VC as a minority shareholder doesn't make a startup affiliated with all that VC's other portfolio companies, if that VC does have certain voting rights, the startup is an affiliate. (But if the VC gives up those rights, the startup will be deemed to be non-affiliated.)
• In short — it's still complicated. But this new guidance makes things a little easier. And for companies that have already returned their PPP loans because they didn't look for other funding, it's particularly good news: They are allowed to reapply.

Closing Bell

Epic gets epic-er

Epic Games is the most impressive company in the world right now. It's got a portfolio of phenomenal products: one of the world's most popular games, one of the world's fastest-growing apps, and even one of the world's best game engines. The latter got a major update yesterday with the announcement of the jaw-dropping Unreal Engine 5. The demo is phenomenally pretty, and even more fascinating are the licensing terms: The company will waive royalties on developers' first $1 million in sales. Yet Epic is still worth "significantly higher than $15 billion." Like I said: impressive.