SEC Filing: Quest Software's PacketTrap MSP Business Accelerates

Sometimes you need to look beyond the headlines to figure out how a managed services software business truly is performing. A case in point: If you dig into SEC filings, you'll discover that Quest Software's 2009 buyout of PacketTrap appears to be exceeding original expectations. And some industry pundits now predict Quest may remain on the managed services software acquisition trail. Here's why.

First, the big picture. It's been a busy week at Quest Software. The company has unveiled its latest PacketTrap MSP release -- an upgraded remote monitoring platform for MSPs. Another Quest division has unveiled tools and services to help channel partners and customers migrate to Office 365. Elsewhere in Quest, the company continues to develop tools for application, database, virtualization and Windows management. It's as if Quest wants to be the Baskin-Robbins of managed services, offering 31 software flavors to hungry MSPs.

So far, the results are promising. Quest's annual revenues topped $767 million in 2010, up a healthy 10 percent from 2009. Although Quest isn't a flashy company I'm starting to wonder: Can Quest emerge as a one-stop shop for MSP-centric software?

Here's why I ask: During separate conversations last week, two MSPs predicted Quest would make more acquisitions in the MSP software market over the next 18 months, perhaps even buying a PSA (professional services automation) or CRM company to help VARs and MSPs run their businesses better. Complete speculation, of course, but Quest has a long track record of acquisitions.

PacketTrap MSP: In Growth Mode

Even if Quest doesn't make a PSA move, the company has a foothold in the managed services market -- thanks to Quest's 2009 buyout of PacketTrap, the remote monitoring software provider. An SEC filing, covering fiscal year 2010, seems to indicate that Quest paid roughly $15 million for PacketTrap. That same SEC filing seems to indicate that PacketTrap's business is accelerating faster than Quest had originally expected. The SEC filing states:
"'The estimated fair value [for PacketTrap] increased due to actual earn-out achievement for 2010, improved expectations for the PacketTrap business in 2011 forward, adjustments to the earn-out agreement providing PacketTrap with greater opportunity to earn a higher payout for the 2011 earn-out period and the passage of time."
The latest PacketTrap MSP release debuted this month. It features integrated antivirus (AV) detection software, customizable reports and a Global Policy Management tool that maps to Service Level Agreements (SLAs) and streamlines daily network monitoring and management, Quest claims.

Admittedly, PacketTrap faces numerous entrenched rivals. Overall, I suspect PacketTrap MSP's annual revenues are roughly one-fifth to one-tenth the size of some rivals. But I'll be curious to see if Quest connects the dots between PacketTrap and other Quest tools -- particularly Foglight, an application performance monitoring platform that allows IT managers to maintain physical and virtual applications. Just a guess, but I suspect MSPs would welcome a single, integrated dashboard for maintaining PCs, network centric hardware and applications...

Stay tuned.

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TAGS: Financing RMM
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