) is looking to enhance its technical capability by gaining
access to new technologies through acquisitions. The company
recently acquired a privately-held company Confio Software, the
maker of Ignite database performance management software for $103
million in cash. This software helps in enhancing the efficiency
of the data base management process.
We believe that Confio would be a meaningful addition to
SolarWinds product portfolio, as both the companies provide
software solutions. Confio has a rich portfolio of products,
which are being used by 40% of the Fortune 50 companies. Confio's
performance over the past few years has earned it a place in the
Deloitte Technology Fast 500 list. Moreover, recently
named it the 2013 Top Company in the software category.
SolarWinds is focusing on smaller companies as far as
acquisitions are concerned. In May 2013, the company acquired
N-able Technologies for $120.0 million in cash.
There was a definite purpose behind this acquisition as
privately-held N-able develops and provides cloud-based remote
monitoring and management (RMM) and service automation software
for Managed Service Providers (MSPs).
N-able enhances SolarWinds' product portfolio, which will help
it to address IT management problems faced by small enterprises.
These enterprises normally employ less than 100 people and follow
a simple IT structure. Hence, they require applications that only
solve important problems related to the performance of their
Although these acquisitions are expected to weigh down
earnings growth in the near term, we believe that these
privately-held companies will enhance the technical capability of
SolarWinds in the long run. Its decision to offer only
subscription-based products will boost recurring revenues going
On the other hand, increased investments in products and
expansion initiatives will likely impact margins in the near
term. Moreover, a volatile macroeconomic environment and
competition from bellwethers such as
International Business Machines Corp.
Hewlett Packard Company
) are the major headwinds, going forward.
Currently, SolarWinds carries a Zacks Rank #3 (Hold).
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