Solarwinds Q3 Result Analysis

Solarwinds Q3 result was announced couple of days back. They made 71.7 M in third quarter that is couple of millions more than the analysts prediction.

The third quarter growth is 33% y-o-y. Both new licenses as well as the maintenance has grown on same percentage. Their maintenance growth is more than 30% for the past 19 quarters.

EMEA growth is 65% y-o-y. UK, Germany, France and middle east growth is 60% y-o-y. North America growth is 34%. US Federal gov. growth is 17%. It is lower than the last year growth of 24%. Australia, Japan, growth rate is 35%y-o-y.

During this period they acquired two small companies one is Athena Securities which on the Firewall log analyser front. On Network management domain the new license growth was 15%. Their international revenue drop is from 25 % to 22% from Q2 to Q3 2012

As per Kevin Thompson,

• Their focus is mainly on developing the relationship with the IT Pros
• Provide a product that are simple to implement, use and maintain
• Provide the products at the lowest cost

The main reason for their increased growth rate is increase in the awareness of the products.

Kevin also states that Solarwinds is the only choice for US federal IT management challenges.

Our focus as we move into the U.S. Federal government's fiscal 2013 will be to leverage our large and growing Federal install base to spread the story of how easy SolarWinds' products are to deploy and use. And that in periods of tightening Federal budgets, SolarWinds is the only choice to solve the U.S. Federal government's IT management challenges.

Their revenue per customer is $8800 which is almost maintained for the oast couple of years. This is not inclusive of the Kiwi and Dameware products that are lower cost products.

On responding to a question on investment on Japan market, Kevin was saying Internet is the main reach for them and that too organic traffic is to be increased. He was not for Paid search the CPC approach. He said it is kind of throwing the money in the well if we don't do it properly. And so they are concentrating on organic traffic. He expects there will be a good market in Japan next few years and they are in right direction.

To answer a question on best bundling module of Solarwinds, he said net flow analyser module is the best bundling with the network performance. Next to that is the applications performance monitor. These two are the major contributor on bundling.

On European growth, Kevin was saying, they are eating their competitor's food. They are hurting their competitor in many ways. They concentrate on the localized websites and localized email campaigns and news letter. They are facing tough time on NPM area. They are working on the product.

Saravanan

Stock Fluctuation for Software Companies

In the last few days there is big fluctuation in the stock value of big companies like Google, Apple and Microsoft. This is mainly after the announcement of Google's Q3 2012 result.

Google result shows drop in the net profit for the third quarter compared to last year. In addition the result was announced in advance due to manual error. The same day the Google price dropped drastically and the day's transaction was stopped.

Due to this drop the stock value of Apple went down. In addition after the release of the IPad Mini pricing, the drop continued.

Last week Friday Microsoft announced their result and there also the profit gone down compared to last year. The stock value has gone down around 8%.

In the last one month, Splunk value gone down by 18%. CA Inc. has got big growth in Jan 2012 also had small impact this month.

Solarwinds was doing well in this year due to more acquisition, gone down by 8%. The Q3 Result will be announced today. This may give some improvement in the value if the result is good.

Cisco had a big drop in May 2012 after their Q4 results, picked up in August 2012 after their Q1 2013 results. Their value also got affected after the Google & Microsoft results this month. In general, the PC or device market is getting affected and that is reflected in the Microsoft and Google results. The same is expected companies like Cisco.

As the Smart phones and tablets usage are increasing, the IOS and Android application development is hot. This will create a new space in the market.

Saravanan

Solarwinds on Cloud Business

Solarwinds took its first step on cloud business. It ties up with Copper Egg a Cloud monitoring and Analytics company to provide free tools for monitoring Cloud Performance on real time. It is free to monitor up to two servers in private and public clouds.

Enterprises who are using cloud computing can use the Solarwinds Cloud Performance Monitor for getting alerts on server, system and operating system  issues in public cloud environments like Amazon EC2, Rack Space, Microsoft Azure or private cloud environments.

SolarWinds Cloud Performance Monitor capabilities include:

• Windows, Linux, MacOS, and FreeBSD monitoring
• Configurable alerts and multi-user access
• 5-second monitoring resolution
• No system polling, push-only
• Delivered as a SaaS service
• Simple and easy installation in 10-seconds

Saravanan

Atlassian - SWOT Analysis

Scott Farquhar and Mike Cannon-Brookes start the Atlassian in 2002 with a basic product JIRA - Bug Tracker.

Today they have 400 employees and there are no sales people. They have products under the following category

• Project and Issue Management
• Collaboration and Content Sharing
• Distributed Version Control &
• Code Quality

Recently they have reduced the starting price of the their flagship product JIRA to $10 per month for Ten users. They are concentrating on the customer satisfaction. After the reduction of the pricing, there is an increase in the customers count by 3000.

They have done 102 M in 2011. This is 35% increase compared to 2010 revenue (75 M in 2010). In that 50% of the revenue is from JIRA the Bug Tracking tool.

Strengths:

Their product is highly configurable. They have rest API that helps users to integrate it with any other third party product.

Their business model is a big strength for them. They have both open source as well as low pricing for the product.

They have both on-premise and on-demand products. 85% of their customers are using on-premise products.

The market place strategy is a major success. We are able to see a maximum downloads of paid plugins both directly from Atlassian and from the other vendors.

As many companies are releasing plugin for JIRA, their customer base will increase and in turn the revenue will grow.

The product is sold on its own due to the quality of the products and the brand name. They have a complete PDLC solution at an affordable price. They will replace Microsoft Projects in many enterprises during the downturn.

Their enterprise customer count alone is more than 21,000.

The current count as at 24-May-2012 is 20,113 customers in 129 countries.

21,000 companies have purchased our enterprise licenses, and tens of thousands more own $10 Starter Licenses  

They count the customers as companies that have currently paid for subscription or licenses. That means their ave. revenue per customer is around 5k.

Their pricing model (user based license) is one of the reasons for the big revenue. Even the plugin cost is very high.

They have released the JIRA 5 in Feb-2012. Their revenue has gone more than 10M on the same month. May be 10M rev. in Feb is due to Enterprise release.

The revenue from Confluence & JIRA combination is selling considerably. In the market place the max. plugin sold through Atlassian is "Team Calendars for Confluence". For this JIRA integration is mandatory. At the same time there is a contribution from confluence as a standalone product.

They are going to increase the confluence on premise pricing from Nov 3rd 2012. The reason could be

• To increase the monthly subscription sale more (or)
• Product adds more value and users are ready to pay and so increase in the pricing

Weakness:

There is no vision in the future. They are doing the same set of products for the past Ten Years. They are all technical people and they don't have exposure on growing to the next level. 

They don't believe in Sales people. 

Opportunity:

As they have good tech talent and perfect issue management framework, they can integrate more collaboration tools such as Chat, etc and this will bring them more revenue.

They have raised fund with VCs. They will help them in moving the company to the next level.

Treats:

Not having good UI. They never give importance to it but in the social world it is going to be a big challenge for them.

The breadth of products they have are very less which may be a big concern for them. More companies are coming with the complete story like Atlassian. 

Saravanan

Google Q3 2012 result analysis

Google has announced its Q3 results. It shows 45% growth y-o-y in Q3 and 14b in total revenue. This includes the Motorola revenue of 2.4b.

On the high level if we see it, this is a big revenue, but the in general, there is a drop in its growth %.  The revenue growth % in Q2 & Q3 2011 compared to previous year was 32.0% & 33.5% respectively where as in 2012 it came down to 21% and 18,5% (after removing the revenue from Motorola). This is the lowest growth % in Google's history (after going public). 

The Revenue growth is mainly due to the Motorola Acquisition.

In addition this is a consecutive second quarter Google closed the quarter with a drop in net profit (due to Motorola investment). The total cost and expenses are increased in Q3 2012. The increase is very high compared to Q3 2011. It increased from 6.662M in Q3 2011 to 11.365 M in Q3 2012. In percentage the increase is from 69% in Q3 2011 to 89% in Q3 2012.

The TAC (traffic acquisition cost) is increasing in the recent past. This has gone up by 1.8% y-o-y. Google has paid a big amount to keep the google.com as default search in IOS 6.

If the growth is in the same pace, the fourth quarter revenue is going to be 15b (12.4b+2.6b).

For the first time in Google's history, US revenue has reached 50% of the total revenue. This is mainly due to slow down in Europe. 

As per the Google CFO Mr. Patrick, there is a drop in the aggregate CPC. So customers are bidding lower in the third quarter compared to last year but the number of clicks is increased.

Our aggregate CPC or cost-per-click was down 15% and down 3% quarter-over-quarter.

In contrast to the above, we are facing increase in the CPC as the competitors are bidding high. May be this is in B2B market. As we enter into the fourth quarter, the CPC still increases as our competitors are desperate in acquiring more contact to get the max. revenue in the final quarter.