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ServiceNow Appoints Bill McDermott CEO, Succeeding John Donahoe

Tom Giles and Nico Grant

(Bloomberg) -- ServiceNow Inc., a cloud-based corporate software provider, appointed former SAP SE Chief Executive Officer Bill McDermott as its new CEO, succeeding John Donahoe, who is departing to run Nike Inc.

McDermott, 58, surprised the software industry earlier this month when he stepped down from Walldorf, Germany-based SAP. He joined Europe’s largest software maker in 2002 and was the first American to hold the CEO position at the company. As CEO for a decade, McDermott embraced cloud computing, changing the way SAP sold software so customers could use it over the internet.

In ServiceNow, McDermott will lead a much smaller company than SAP, but one that is growing rapidly. The Santa Clara, California-based company makes software that businesses use to automate workflows such as creating a help desk for employees, managing internal projects, bringing on board new workers and providing customer service. The company’s large deals with big corporate clients have fueled sales, which grew 36% in fiscal 2018 to $2.61 billion.

“Investors wonder if ServiceNow is such a great opportunity why would John Donahoe leave, even if it is to take over one of the most iconic consumer brands in Nike,” Sterling Auty, an analyst at JPMorgan Chase & Co., wrote Tuesday in a note. “Also, our conversations with investors makes us believe that Bill McDermott will receive a lukewarm reception as the incoming CEO.”

Separately, ServiceNow reported preliminary earnings results, which had been scheduled to be released Wednesday. Subscription revenue grew 35% in the third quarter to $835 million, the company said in a statement. For the full fiscal year, the company expects subscription revenue of $3.24 billion to $3.25 billion. ServiceNow expects subscription billings to grow 32% to 33% this fiscal year compared with a year earlier.

ServiceNow’s stock fell more than 9% in extended trading on the news. The shares had climbed 28% this year to $228.34 at the close in New York Tuesday.

Donahoe, 59, who joined ServiceNow in April 2017, will remain CEO through the end of the year before starting his Nike tenure in January, the company said. The former EBay Inc. chief executive officer will maintain his seat on ServiceNow’s board through his term, which ends in June.

(Updates with analyst comment in fourth paragraph.)

To contact the reporters on this story: Tom Giles in San Francisco at tgiles5@bloomberg.net;Nico Grant in San Francisco at ngrant20@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Andrew Pollack, Alistair Barr

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