SolarWinds gets a gust from IPO investors

Posted May 20th 2009 11:20AM by Tom Taulli
Filed under: Goldman Sachs Group (GS)

So far, it looks like it will be a good week for IPOs. Yesterday, OpenTable upped the price range on its offering.

And, today SolarWinds (NYSE: SWI) hit the markets with its public debut, up 20% to $15.

SolarWinds is a provider of enterprise-class network management software. While there are many players in the market -- especially large companies like Hewlett Packard (NYSE: HPQ), IBM (NYSE: IBM) and Cisco (NASDAQ: CSCO) -- this company has built a unique strategy and business model.

First of all, the software is easy-to-use and focused on the needs of network professionals, not sold to CFOs. In fact, because of the low-price points, purchases of SolarWinds products is usually "under the radar" for the budget-wary finance types.

Next, the software can work for an organization of any size. Since 2006, the customer base has gone from 28,000 to 80,000.

Also, SolarWinds has a thriving online community. Not only does this build loyalty, but also allows for cheaper customer support.

All in all, the formula has been quite successful. Sales have surged from $38.2 million to $93.1 million from 2006 to 2008. During this time, EBITDA went from $27.1 million to $48.4 million.

And, the market opportunity is large. According to Gartner, the worldwide software for managing networks is expected to grow from $4.78 billion in 2009 to $5.7 billion in 2013. What's more, the market may be even larger since SolarWinds has made it possible for smaller organizations to purchase its software.

For more information on the deal, you can find the prospectus at the SEC website.

Tom Taulli is the author of various books, including The Complete M&A Handbook and the founder of BizEquity, a free online business valuation tool for small businesses.

Tags: IPOs, SolarWinds