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ServiceNow Projects Robust Sales on Workflow Software Demand

(Bloomberg) -- ServiceNow Inc. projected subscription sales in the current quarter that narrowly topped Wall Street estimates, signaling that companies are continuing to invest in upgrading their business workflow software while employees remain stuck at home.

Subscription revenue will be $1.15 billion to $1.16 billion in the period ending in December, the Santa Clara, California-based company said Wednesday in a statement. Analysts, on average, estimated $1.13 billion. The company raised its fiscal-year subscription sales forecast to as much as $4.26 billion from about $4.23 billion.

Chief Executive Officer Bill McDermott has pledged to turn 17-year-old ServiceNow into a “software juggernaut.” The company has a plan to reach $10 billion in revenue, on an unspecified time frame, from selling applications that help companies organize their personnel, customer service and IT operations and transition to more online work.

Like rival Salesforce.com Inc., ServiceNow has offered clients a set of software tools to help them safely return to their offices during the coronavirus pandemic. The National Basketball Association and Women’s National Basketball Association used the company’s applications to resume their seasons during the pandemic, McDermott said on a call with analysts. The U.S. Senate, U.S. Air Force and U.S. Department of Veterans Affairs also signed deals with ServiceNow in the third quarter, he said.

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“The reality is, others came into the market with good marketing; we came into the market with a great product that was ready to implement in minutes,” McDermott said in an interview. “That’s why we have thousands and thousands of downloads, hundreds of customers and we’re operating at mass scale.” Uber Technologies Inc. selected ServiceNow because it needed a system up and running in two weeks and no other software maker could do that, he added.

Salesforce has said its product, called work.com, is being used by 60 government customers worldwide, including 35 U.S. state agencies and federal agencies including NASA.

In the third quarter, ServiceNow reported subscription revenue increased 31% to $1.09 billion, compared with analysts’ estimate of $1.06 billion. Total sales increased 30% to $1.15 billion in the period ended Sept. 30. Profit, excluding some items, was $1.21 a share. Analysts projected $1.03.

McDermott said companies are using ServiceNow’s software to address a variety of needs, even in the face of business slowdowns during the pandemic, which has forced them to change “on the fly.”

“You’re hiring people, you’re on-boarding people, you need to train people, you need to provide people a self-service employee experience on mobile,” the executive said. “And by the way, you actually need to keep them safe if you do give them the option of coming into the office.”

Shares rose more than 2% in extended trading after closing at $484.05 in New York. The stock has climbed 71% this year.

ServiceNow also appointed Apple Inc. executive Larry Jackson to its board of directors, now enlarged to 11 seats. Jackson, the global creative director of Apple Music, will be ServiceNow’s first Black director. McDermott said in a statement that Jackson would bring a focus on customer experience to the board.

The software maker earlier Wednesday said it named Gabrielle Toledano, previously of Keystone Strategy LLC and Comcast Ventures, as chief talent officer effective in January.

(Updates with comments from CEO starting in the fifth paragraph.)

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