October 26, 2022
Photo: Uwe Anspach/picture alliance via Getty Images
Hello and welcome to Protocol Enterprise! Today: Why ServiceNow beat its already lowered guidance for the third quarter if you ignore (gestures wildly), how Mobileye fared on its first day back on the public markets, and the ongoing power of defaults comes to security.
ServiceNow fell short of its third-quarter revenue guidance according to regular accounting standards, while also lowering its full-year forecast on Wednesday. But like many companies reporting earnings this week, the SaaS giant was susceptible to foreign exchange impacts, and CEO Bill McDermott was pleased with its results.
ServiceNow reported subscription revenues of $1.74 billion for the quarter, a tad under its projected $1.75 billion, while also forecasting $6.87 billion in revenue for the year, down from its previously lowered guidance of $6.92 billion in 2022 revenue.
ServiceNow can’t control the macroeconomic environment or currency exchange rates, much of which has been caused by geopolitical uncertainty in Europe. But the company is still mostly focused on the U.S. market, with plans to expand globally over the coming years to reach $11 billion in sales by 2024.
But ServiceNow did feel the need to make a few changes to reach its goals.
As McDermott takes an even firmer grip over ServiceNow, he will increasingly mold the company into his image.
Valuations have become less hype-driven and more realistic; the amount of time spent on due diligence has increased substantially; and every founder needs to directly, clearly, and concisely answer the question, “Does this project have any real-world utility, and does it create economic value?”
It’s impossible to raise the dead. But Mobileye's Wednesday IPO demonstrates that the market to list public companies hasn't lost all of its vital signs just yet.
Mobileye stock had a nice first day, rising nearly 40% to close at $28.97. The Intel-controlled company sold roughly $860 million worth of stock at the IPO and sold an additional $100 million to General Atlantic. It priced the issue at $21, a dollar above the top end of the $18 to $20 a share it was hoping to get.
Intel CEO Pat Gelsinger was careful not to call Mobileye's return to the public markets a capital raise at an event earlier this week, describing it instead as a decision designed to move it into the market.
There’s truth to what Gelsinger is saying: The original reason Intel planned the IPO was for financial engineering — to unlock for Wall Street the value in the fast-growing autonomous driving unit while the rest of Intel figures out how to correct years of dysfunction. Two separate stocks, but still one company (Intel controls Mobileye still).
Intel had once hoped to bank a valuation of $50 billion but later revised that down to $30 billion before settling on the roughly $20 billion market value that it actually managed to achieve. For context, Intel bought the then-public Mobileye for $15.3 billion in 2017.
If you caught either of CISA director Jen Easterly's conference keynotes last week, you may have spotted a running emphasis on a certain message: the need for "secure by default" technology products. The most interesting element of that, to me at least, is her request for vendors to create software and hardware products that are less plagued by vulnerabilities.
The message also relates to multifactor authentication, which Easterly called upon vendors to make available as the default option during her keynote at the FIDO Alliance's Authenticate conference. But Easterly’s call to action for technology providers during the Mandiant mWISE conference covered more than just MFA.
"We have accepted this strange cultural norm where software and technology comes off the line just rife with vulnerabilities," Easterly said at mWISE. "And I think we need to expect more and really demand more from our technology providers."
The reason, as she put it during that talk, is not just that it would improve overall security (which it would of course do). But even more critically, secure by default is important because "we have put the burden on the least capable and the least knowledgeable about the threat to defend themselves, as opposed to [on] the technology providers,” she said during mWISE.
Ultimately, Easterly indicated that this “call to action for technology vendors to be much more focused on secure by default" is going to be a continuous theme in the coming year. It remains to be seen how this message will be received by vendors, particularly those for whom "the benefits of insecure products far outweigh the downsides" — as Easterly's predecessor, Chris Krebs, said during Black Hat this year.
Sigstore, the open-source project at the heart of this week’s Protocol Enterprise profile on Chainguard, made its software signing and verification technology generally available for free this week at KubeCon.As all eyes turn to AWS earnings tomorrow, Bloomberg’s Tim Culpan injected some much-needed sanityinto a cloud-stock investor climate where 37% revenue growth is now considered a disaster.
The VC correction is proving once again that valuations are not an indicator of success. While money continues to flow, the crypto winter and VC slowdown have forced even the most committed Web3 venture capitalists (and their investors) to proceed with more caution.
Thanks for reading — see you tomorrow!