Potential SolarWinds MSP Spinoff Could Be in the WorksPotential SolarWinds MSP Spinoff Could Be in the Works
SolarWinds would retain its core IT management business.
August 6, 2020
SolarWinds is exploring a potential spinoff of its MSP business into a separately traded public company. The standalone entity would provide IT service management to help MSPs deliver outsourced IT services to their SMB end customers.
SolarWinds would retain its core IT management business focused primarily on corporate IT organizations.
SolarWinds’ Kevin Thompson
“We are exploring a potential spinoff transaction because we believe that, if completed, a spinoff may enhance the successful operation of both the MSP and the core IT management businesses, and increase their respective values,” said Kevin Thompson, SolarWinds president and CEO. “By splitting the two businesses into separate companies, it may be that the business and related investment, spending and capital allocation policies of each company could be managed consistently with each business’ objectives.”
Goals for SolarWinds MSP Spinoff
The spinoff would establish specific and independent goals. The businesses could manage investments and objectives that are “more closely tailored to each business’ market needs and customer requirements,” Thompson said.
“Should we move forward with the spinoff, we would expect that the core IT management business would be focused on maintaining our best-in-class profit margins, while the MSP business would be focused on long-term growth with strong, differentiated profitability metrics for a SaaS business,” he said.
Shareholders could “more clearly” evaluate the performance and future potential of each entity on a standalone basis,” the company said. Each could pursue its own distinct business strategy and capital allocation policy.
Completion of any spinoff would be subject to various conditions, including final approval by SolarWinds’ board of directors. But SolarWinds isn’t making any firm commitments regarding how the spinoff would happen — if at all.
SolarWinds doesn’t expect to complete the transaction before the end of March 2021.
Also Thursday, SolarWinds announced its earnings for the second quarter of 2020. Revenue was $246 million, up from approximately $229 million for the year-ago quarter. Profit was nearly $13 million; that compared to a $2 million loss a year ago.
Last month, SolarWinds unveiled enhancements across its IT operations management portfolio to give IT pros new levels of hybrid IT support. The updates include new versions of network, systems and database management products.
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