Solarwinds Q3 2013 Result Analysis

Solarwinds closed the Q3 2013 with $87.5 M a 23% growth Y-O-Y. The net income was $22.8 M which is almost same as that of last year $22.4M. This is lower than the Analysts estimates.

• Their traditional IT management products new sales growth in Q3 is 5% compared to last year. 
• Their main contributor for Solarwinds' new revenue is the MSP products. The MSP products new revenue growth in Q3 2013 is 87% Y-O-Y.
• The revenue growth is mainly due to Maintenance revenue and the Subscription revenue. Growth was 42% - $53 M
• N-able's new customer count has gone up by 29% Y-O-Y.

This means, they are moving their revenue model from the one time license to subscription license. In addition, their growth is mainly due to the acquired product N-able, which is a MSP product. The revenue from the acquired products is around 9M (N-able 6 M & Confio. 3M). This means their third quarter revenue growth is around 10% only compared last year.\

• Orion new customers count growth is 9% 
• SolarWinds Storage Manager and SolarWinds Log & Event Manager new license sales were below the expected.   
• Federal Revenue was flat in 2013 compared to 2012.
• Average revenue per customer is increased from $7500-$8000.

Solarwinds is getting more bigger deals and so we have more opportunities to increase our revenue.

They increased the sales force by 14% with one new VP sales and Two new sales Directors.

Steve Ballmer announces to retire from Microsoft in next 12 months

Steve Ballmer announces to retire from Microsoft in next 12 months on Thursday and the share increased by 6% on the same day.

Now Microsoft is looking for a new CEO. The new CEO is having a big challenge in front of him defining a proper strategy to catch up the lost strength over a decade to companies like Google, Apple, etc.

They lost billions of dollors by spending onBing search which never take off against Google search. Also they lost in cloud market, tablets and smart phones. It is going to be the responsibility of the new CEO io compete on every domain including their IE browser where they are loosing to chrome.

On office suit, still they have the on premise market share but their base in cloud is not so good. Many new vendors are there to take the market.

They have to look for a person like Morrisa Mayer present CEO of Yahoo. The contenders for the CEO of Microsoft includes, CEO of EBAY, señor VP of google Vic Gundotra who is taking care of social in Google. Vic was from Microsoft. Also there are few contenders from Microsoft itself like Qi lu, Tony Bates, and Satya Nadella.

It is time to see how a monopoli company is going to bounce back with the new CEO and compete with the present giants Google and Apple. Steve Balmmer should identify a correct visionary to lead Microsoft. Will Bill Gates be back as CEO of Microsoft?

Saravanan

Apple stock short-term increase after Carl Icahn tweet

Apple stock reached $500 after few months after the tweet by Carl Icahn. He met Tim cook CEO of Apple and made the tweet.

We currently have a large position in APPLE. We believe the company to be extremely undervalued. Spoke to Tim Cook today. More to come. 

Had a nice conversation with Tim Cook today. Discussed my opinion that a larger buyback should be done now. We plan to speak again shortly.

11:55 PM - 13 Aug 2013

This is going to be a short-term spike and Tim Cook has to think of future of Apple. This increase may continue for some more time as Apple is going to release the iPhone 6 in September. As there is no new innovation from them, the future of Apple is going to be stagnant. Apple's smartwatch is one of the major initiatives and nothing big to say.

Already Microsoft missed the growth by not investing on innovation and they sre struggling to grow where as the investment made by Google on Android is going to give a high growth to Google compared to Apple. In the recent past Google also started reducing its R&D spending that is a big concern.

Saravanan.

Solarwinds Share Slumps

After the Q2 2013 results from solarwinds, the share slumps drastically. It is happening for the third time this year. Solarwinds share slumps first ti me this year in April immediately after their Q1 2013 results. Then it went down on the day of the N-able acquisition.

In addition, most of the analysts down the value of Solarwinds shares.

Needham & Company downgraded SolarWinds (NYSE: SWI) from Buy to Hold following weak Q2 earnings.

analysts at Jefferies Group cut their price target on shares of SolarWinds from $59.00 to $45.00 

Analysts at Robert W. Baird cut their price target on shares of SolarWinds from $54.00 to $46.00

One good news is Zacks has upgraded the SWi rattings from under performing to neutral on August 1st. 

Solarwinds plans to repurchase $50M of its shares in the next 12 months. After this announcement, the shares started going up. Solarwinds is going to have a tough next few quarters. We have to wait and see the progress of it with the acquisition and grow strategy.

Companies that has the acquisition strategy like Google are facing tough time in the last couple of quarters. The cultural change will have impact on the growth of the company. We have to wait and watch how these companies are going to perform in future.

Saravanan

Solarwinds joins Google, Microsoft, IBM list

Solarwinds joins the list of companies like Google, IBM, Intel, Microsoft in doing lower than the Analysts  expectation in Q2 2013.

Solarwinds did 77.5 M in Q2 2013 against the expected amount of 78.9M. They are doing continuously for the second time. Even the revenue of Solarwinds is inclusive of the revenue from the newly acquired company N-able. If we deduct the revenue from N-able (around 6M - last year they did 24M), then the revenue is lower than the last quarter. That means they are shrinking Q-O-Q continuously for the second time.

This quarter growth of Solarwinds is the lowest ever y-o-y growth for them in the last three years. That too they were able to make it only because of the acquisition. Thompson, CEO of Solarwinds accepts that the N-able is doing better than expected. They didn't do well in new business.

Thompson conceded that "license sales results did not meet our expectations."

There is a large market for Network and Systems Management market. But no big company tapped it properly.

This trend shows Solarwinds will be doing around 318M down from the projection of around 335-340M earlier. If they do so,  they will have a growth of 19% Y-O-Y in 2013 which is the lowest ever growth for them.  Again the main contributor for this growth is N-able acquisition. Their basic products entered into a stagnation or even shrinking.

They are concentrating on various activities to increase the revenue in second half of 2013.

our outlook for the second half of 2013 includes aggressive investments in our business including new product features and modules, demand generation and branding activities, and additional resources within our sales and product development organizations,"

Saravanan

Solarwinds Growth Slump

SolarWinds growth slumped for the first time ever since they went public. The Q1 2013 result shows revenue of $72.93 M that is lower than the previous quarter. SolarWinds had always grown Q-O-Q. But this quarter they had a drop of 1% Q-O-Q.

They have grown Y-O-Y by 22%. Their Q1 2013 was greatly affected by the drop in their bigger deals. The revenue per customer has gone down in Q1 compared to the previous quarters.  Below is the statement made by Kevin CEO of SolarWinds.

a decline in the number of transactions that we closed in the size range of $20,000 to $75,000. 

The growth is mainly from the smaller end products like Log & Event Management product, Web Help Desk and Serv -U Managed File Transfer. The main products of SolarWinds sales have gone down in this quarter compared to last year same period.

The smaller end products need more sales people and that has become a limitation in the growth, as they are good at selling higher value products.

a reduction in the number of core products per invoice of approximately 8% as compared to the first quarter 2012 

In the recent past they have acquired N-Able for $120 M that will bring around $10 M revenue this year.  This also affected their stock, as there is a big drop in the cash balance. From mid May onwards the stock value started dropping. It has dropped by 30% in the last Three months.

Yesterday Zacks Investments Research downgraded SolarWinds rank to #5 (Strong Sell) from rank #3 (Buy).

Read more: http://www.nasdaq.com/article/solarwinds-downgraded-to-strong-sell-analyst-blog-cm253663#ixzz2WfnstprW

All the revenue-bringing products (Web Help Desk, Log & Event Management & Serv -U Managed File Transfer) of Q1 2013 are from their acquisition companies (Web Help Desk Software, Dameware, Serv-U). This shows, if they didn't go for acquisition, they would have ended with stagnant in growth in Q1 2013.

This year is going to be a challenging year for companies that are doing business on IT Enterprise Management especially on Network Performance domain and System Management domain.

Saravanan

SolarWinds to Buy N-able Technologies

SolarWinds to Buy N-able Technologies for $120 Million.

http://www.n-able.com/company/newsroom/press_releases/2013-05-21.aspx

 
http://www.obj.ca/Technology/2013-05-22/article-3254000/UPDATE-Nable-to-remain-in-Ottawa-following-120M-SolarWinds-acquisition/1

Solarwinds started to enter into the cloud business by acquiring N-able. N-able has RMM and MSP Service Automation Platform! They have products for

• Remote Monitoring and Management
• Asset and License Management
• Device Management
• Mobile device Management
• Password Management
• Patch Management
• Group Policy Management

N-able’s client base includes more than 2,600 MSPs worldwide, which serve approximately 91,000 small and medium-sized businesses. They have done $24 M in 2012. They are having around 200 employees.

N.able has doubled their customer base in 2012. This is one of the reasons for this deal.

Saravanan