Software stock sell-off looks overdone, ServiceNow CEO suggests
In this article:
Yahoo Finance anchor and editor-at-large Brian Sozzi speaks with ServiceNow CEO Bill McDermott on software stocks selling off, the demand for software during the pandemic and how CEOs could keep employee morale up.
Video transcript
BRIAN SOZZI: All right, joining Yahoo Finance now is ServiceNow's CEO, Bill McDermott. Lots to get to in the quarter here. It's being well received by the markets. But before we go there, I do want to tap into your industry experience.
I've been following your career since you were at SAP. Now, of course, ServiceNow for, for a good bit. You have seen cycles of higher interest rates. What have you seen in the past? You know, I think we have to dispel this myth out there a bit that software companies and tech can't do well when interest rates go up.
BILL MCDERMOTT: An interest rate increasing environment, the only impact it could have is on companies that need to access the credit markets to fuel their growth ambitions. But for companies like ServiceNow who are organic growth stories with very large cash positions and that will continue to increase, that don't need to access the credit markets for their growth, are simply in a perfect position to create shareholder value. I actually think of it as a safe harbor.
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I mean, if you're growing really fast, you're spinning off free cash flow, and you don't need to access debt, you're in just a great position. So that's where it's at. Only companies that really need that credit will, to some extent, be impacted. But it's totally overblown in the media right now as it relates to tech in general.
BRIAN SOZZI: I can't believe it, Bill. This was the first week where I actually had some folks remark to me, hmm, maybe because the Fed raises rates, we might see a recession. I see none of that, none of that in your numbers whatsoever. What are you hearing from customers to kick off the first quarter?
BILL MCDERMOTT: Customers are focused on digitizing their businesses. And you've got to really look at it from their point of view, right? They are in inflationary times, depending on their industry, it will impact different industries in different ways. To your point, they are in a, quote, unquote, "rising interest rate environment." That does impact some industries differently than others.
There are supply chain dislocations in the global economy, and all those things are true. But CEOs are sitting back saying, I got to create a great experience for my employees. I'm in the middle of a talent war. I have to keep my best people happy.
I have to be able to attract new people, on board them, train them, get them up to speed, and then manage their experience in my company in a truly flawless and digital way. And that's the unique attribute of what we bring, a consumer grade user experience for the employees.