Needham & Company Maintains a 'Hold' on SolarWinds (SWI) Following $35m Acquisition of TriGeo
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Price: $18.49 --0%
Rating Summary:
9 Buy, 21 Hold, 3 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
9 Buy, 21 Hold, 3 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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Needham & Company maintains a 'Hold' on SolarWinds (NYSE: SWI).
Needham analyst says, "Early today, Solarwinds announced it will be acquiring SIEM and logging company TriGeo for $35m cash. We view this acquisition by Solarwinds as another step in its plans to create a platform which goes beyond simple systems monitoring (core Orion product). We have seen Solarwinds acquire TekTools (early 2010, storage/SAN monitoring, $4-5m runrate) and Hyper9 (early 2011, virtualization monitoring, $1-2m runrate) as “addons” to the core systems monitoring Orion franchise, with modest impact to SWI revenue. Today’s announcement of TriGeo ($8-9m runrate) is complex, as it will take an appliance-based solution, turn it into a pure software delivery, with dramatic drop in price, to the $5k range. The rationalization for this deal is that SWI’s customer base is asking for logging solutions to manage data center efficiency (not the security-theme of SIEM TriGeo also serves). In our view, this is likely a change in tactic for SWI, focusing on a more mature asset (900 customers, sustained revenue run rate) rather than earlier “IP” acquisitions which did not seem to have a franchise of their own. We believe the transition to pure software delivery is manageable, yet we are unsure of the market demand for a low-end SIEM for $5k, likely for departmental use, particularly when there are other competing solutions such as Splunk, which is used for logging and operational analysis, and is also in the “freemium” model. We are adjusting our CY11 numbers for $0.01 total CY11 dilution, and +3m to CY11 revenue. Our CY12 revenue remains unchanged, yet our costs increase, lowering EPS from 1.00 to 0.98 EPS."
For more ratings news on SolarWinds click here and for the rating history of SolarWinds click here.
Shares of SolarWinds closed at $25.34 yesterday.
Needham analyst says, "Early today, Solarwinds announced it will be acquiring SIEM and logging company TriGeo for $35m cash. We view this acquisition by Solarwinds as another step in its plans to create a platform which goes beyond simple systems monitoring (core Orion product). We have seen Solarwinds acquire TekTools (early 2010, storage/SAN monitoring, $4-5m runrate) and Hyper9 (early 2011, virtualization monitoring, $1-2m runrate) as “addons” to the core systems monitoring Orion franchise, with modest impact to SWI revenue. Today’s announcement of TriGeo ($8-9m runrate) is complex, as it will take an appliance-based solution, turn it into a pure software delivery, with dramatic drop in price, to the $5k range. The rationalization for this deal is that SWI’s customer base is asking for logging solutions to manage data center efficiency (not the security-theme of SIEM TriGeo also serves). In our view, this is likely a change in tactic for SWI, focusing on a more mature asset (900 customers, sustained revenue run rate) rather than earlier “IP” acquisitions which did not seem to have a franchise of their own. We believe the transition to pure software delivery is manageable, yet we are unsure of the market demand for a low-end SIEM for $5k, likely for departmental use, particularly when there are other competing solutions such as Splunk, which is used for logging and operational analysis, and is also in the “freemium” model. We are adjusting our CY11 numbers for $0.01 total CY11 dilution, and +3m to CY11 revenue. Our CY12 revenue remains unchanged, yet our costs increase, lowering EPS from 1.00 to 0.98 EPS."
For more ratings news on SolarWinds click here and for the rating history of SolarWinds click here.
Shares of SolarWinds closed at $25.34 yesterday.
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