SolarWinds Corporation (NYSE: SWI), a leading provider of
powerful and affordable IT management software, announced today
that its board of directors has authorized the company’s management
team to explore a potential spin-off of its MSP business into a
newly created and separately traded public company.
If completed, the standalone entity would provide broad and
scalable IT service management solutions designed to enable managed
service providers, or MSPs, to deliver outsourced IT services for
their small and medium size business end-customers and more
efficiently manage their own businesses. SolarWinds would retain
its Core IT Management business focused primarily on corporate IT
organizations. SolarWinds believes that, if completed, the
potential spin-off would enable shareholders to more clearly
evaluate the performance and future potential of each entity on a
standalone basis, while allowing each to pursue its own distinct
business strategy and capital allocation policy.
If SolarWinds proceeds with the spin-off, it would be structured
as a tax-free, pro-rata distribution to all SolarWinds shareholders
as of a record date to be determined by the board of directors of
SolarWinds. If completed, upon effectiveness of the transaction,
SolarWinds shareholders would own shares of both companies.
“We are exploring a potential spin-off transaction because we
believe that, if completed, a spin-off may enhance the successful
operation of both the MSP and the Core IT Management businesses and
increase their respective values,” said Kevin Thompson, president
and CEO, SolarWinds. “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. Establishing
specific and independent goals may enable both the Core IT
Management and MSP businesses to manage investments and objectives
that are more closely tailored to each business’ market needs and
customer requirements. Should we move forward with the spin-off, 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.”
Completion of any spin-off would be subject to various
conditions, including final approval of SolarWinds’ board of
directors, and there can be no assurance that the potential
spin-off transaction will be completed in the manner described
above, or at all. If SolarWinds proceeds with the spin-off, it does
not expect to complete the transaction earlier than the end of the
first quarter of 2021. DLA Piper LLP (US) is serving as legal
advisor.
This press release does not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor will there be
any sale of any securities in any state or other jurisdiction in
which such offer, solicitation or sale is not permitted.
Conference Call and Webcast
In conjunction with this announcement, SolarWinds will host a
conference call today to discuss the potential spin-off of its MSP
business, as well as its financial results, business and business
outlook, at 4:00 p.m. CT (5:00 p.m. ET/2:00 p.m. PT). A live
webcast of the call and materials presented during the call will be
available on the SolarWinds Investor Relations website at
http://investors.solarwinds.com. A live dial-in will be available
domestically at (877) 823-8676 and internationally at +1 (647)
689-4178. To access the live call, please dial in 5-10 minutes
before the scheduled start time. A replay of the webcast will be
available on a temporary basis shortly after the event on the
SolarWinds Investor Relations website.
Forward-Looking Statements
This press release contains “forward-looking” statements, which
are subject to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, including statements regarding our
positioning in the current economic environment and our
expectations regarding the potential spin-off of our MSP business
into a newly created and separately traded public company and our
preliminary strategic, operational and financial considerations
related thereto. In addition, we are currently exploring the
spin-off. It has not been approved by our board of directors, and
our statements with respect thereto are preliminary in nature and
subject to change as additional information becomes available and
as we consider and plan further the future strategic, operational,
financial and capital objectives, profiles and structures of the
two businesses.
These forward-looking statements are based on management's
beliefs and assumptions and on information currently available to
management. Forward-looking statements include all statements that
are not historical facts and may be identified by terms such as
“aim,” “anticipate,” “believe,” “can,” “could,” “seek,” “should,”
“feel,” “expect,” “will,” “would,” “plan,” “intend,” “estimate,”
“continue,” “may,” or similar expressions and the negatives of
those terms. Forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause actual
results, performance or achievements to be materially different
from any future results, performance or achievements expressed or
implied by the forward-looking statements. Factors that could cause
or contribute to such differences include, but are not limited to,
the following: (a) risks related to the potential spin-off of our
MSP business into a newly created and separately traded public
company, including that the process of exploring the spin-off and
potentially completing the spin-off could disrupt or adversely
affect the consolidated or separate businesses, results of
operations and financial condition, that the spin-off may not
achieve some or all of any anticipated benefits with respect to
either business, and that the spin-off may not be completed in
accordance with our expected plans or anticipated timelines, or at
all; (b) the possibility that the global COVID-19 pandemic may
adversely affect our business, results of operations and financial
condition; (c) any of the following factors either generally or as
a result of the impacts of the global COVID-19 pandemic on the
global economy or on our business operations and financial
condition or on the business operations and financial conditions of
our customers, their end-customers and our prospective customers:
(i) reductions in information technology spending or delays in
purchasing decisions by our customers, their end-customers and our
prospective customers, (ii) the inability to sell products to new
customers or to sell additional products or upgrades to our
existing customers, (iii) any decline in our renewal or net
retention rates, (iv) the inability to generate significant volumes
of high quality sales leads from our digital marketing initiatives
and convert such leads into new business at acceptable conversion
rates, (v) the timing and adoption of new products, product
upgrades or pricing model changes by SolarWinds or its competitors,
(vi) potential foreign exchange gains and losses related to
expenses and sales denominated in currencies other than the
functional currency of an associated entity, (vii) risks associated
with our international operations; (d) the possibility that our
operating income could fluctuate and may decline as percentage of
revenue as we make further expenditures to expand our operations in
order to support additional growth in our business; (e) our
inability to successfully identify, complete, and integrate
acquisitions and manage our growth effectively; (f) our status as a
controlled company; and (g) such other risks and uncertainties
described more fully in documents filed with or furnished to the
Securities and Exchange Commission, including the risk factors
discussed in our Annual Report on Form 10-K for the period ended
December 31, 2019 filed on February 24, 2020, the Form 10-Q for the
quarter ended March 31, 2020 filed on May 8, 2020 and the Form 10-Q
for the quarter ended June 30, 2020 that SolarWinds anticipates
filing on or before August 10, 2020. All information provided in
this release is as of the date hereof and SolarWinds undertakes no
duty to update this information except as required by law.
#SWIfinancials
About SolarWinds
SolarWinds (NYSE:SWI) is a leading provider of powerful and
affordable IT infrastructure management software. Our products give
organizations worldwide, regardless of type, size or IT
infrastructure complexity, the power to monitor and manage the
performance of their IT environments, whether on-premises, in the
cloud, or in hybrid models. We continuously engage with all types
of technology professionals-IT operations professionals, DevOps
professionals, and managed service providers (MSPs)-to understand
the challenges they face maintaining high-performing and highly
available IT infrastructures. The insights we gain from engaging
with them, in places like our THWACK online community, allow us to
build products that solve well-understood IT management challenges
in ways that technology professionals want them solved. This focus
on the user and commitment to excellence in end-to-end hybrid IT
performance management has established SolarWinds as a worldwide
leader in network management software and MSP solutions. Learn more
today at www.solarwinds.com.
The SolarWinds, SolarWinds & Design, Orion, and THWACK
trademarks are the exclusive property of SolarWinds Worldwide, LLC
or its affiliates, are registered with the U.S. Patent and
Trademark Office, and may be registered or pending registration in
other countries. All other SolarWinds trademarks, service marks,
and logos may be common law marks or are registered or pending
registration. All other trademarks mentioned herein are used for
identification purposes only and are trademarks of (and may be
registered trademarks of) their respective companies.
© 2020 SolarWinds Worldwide, LLC. All rights reserved.
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Investors: Howard Ma Phone: 512.498.6707
ir@solarwinds.com
Media: Tiffany Nels Phone: 512.682.9535
pr@solarwinds.com
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