IT management software provider
recently announced that it has entered into a definitive
agreement to acquire N-able Technologies for $120.0 million in
cash. The acquisition is expected to be complete by the end of
Privately-held N-able develops and provides cloud-based remote
monitoring and management ("RMM") and service automation software
for Managed Service Providers ("MSPs"). Ottawa, Canada based
N-able serves more than 91,000 small businesses and sells its
products through 2,600 MSPs.
The N-able acquisition will expand SolarWinds' product portfolio,
which will help it to address the 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 businesses.
N-able's cloud-based products address these issues in a cost
efficient manner. SolarWinds estimates N-able's worldwide market
opportunity to be approximately $4.0 billion in addition to its
existing $65.0 billion market opportunity. Apart from expanding
its product portfolio, the acquisition will increase SolarWinds'
competitive edge in the RMM market.
Moreover, as the demand for cloud based IT management services
increases from large and mainstream organizations, SolarWinds
expects to use the talent and knowledge of the N-able team to
efficiently handle their needs over the long term.
N-able Outlook for 2013
N-able is expected to contribute revenues of approximately $8.0
to $9.0 million for the remainder of 2013. This will increase
revenues by 3.0%. Currently, SolarWinds forecasts revenues of
$326.5-$334.0 million for 2013 (21.4% to 24.2% year-over-year
SolarWinds expects 80.0% of N-able revenues to be subscription
revenues, while the remainder will come from maintenance of
N-able's historical perpetual license sales. SolarWinds plans to
discontinue perpetual license sales post the completion of the
SolarWinds expects N-able to post operating loss of $12.0
million. The N-able acquisition is expected to negatively impact
earnings by 11 cents. Currently, SolarWinds expect earnings per
share in the range of $1.59 to $1.65 per share.
Although the acquisition will lower earnings growth in the near
term, we believe that N-able is a significant addition to the
company's product portfolio. SolarWinds' decision to offer only
subscription-based products will boost recurring revenues going
However, declining cash balance (estimated $154.0 million at the
end of second quarter compared with $274.0 million at the end of
first quarter) is a major concern in the near term. Additionally,
increased investments in products and expansion initiatives will
likely impact margins in the near term.
Moreover, volatile macroeconomic environment and competition from
bellwethers such as
International Business Machines (
Hewlett Packard (
BMC Software (
are the major headwinds going forward.
Currently, SolarWinds has a Zacks Rank #3 (Hold).
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