SolarWinds Breezes into Colorado, Acquires Confio Software for $103M
Add Confio Software, a Boulder-based developer of database performance management software, to the list of Colorado tech companies making substantial exits this year. SolarWinds (NYSE: SWI), an Austin, TX-based company that develops IT management software, bought Confio for $103 million in a cash deal that closed Monday.
SolarWinds president and CEO Kevin Thompson said during a conference call that Confio is “the last meaningful piece of the puzzle we set out to assemble in early 2011 when we entered the systems and applications management market.” Confio is SolarWinds’ second major acquisition this year; in May it bought N-able Technologies for $120 million.
Confio Software reached an inflection point in the past few years, according to information the company released before the deal and financial information SolarWinds provided during the conference call.
Confio’s annual revenue is more than $15 million, which put it close to profitability. Confio has about 70 employees and 1,200 customers, ranging from small businesses to large enterprise clients, and they pay an average of $15,000 per transaction.
The growth spurt earned Confio a spot on the Inc. 5,000 list of fastest growing privately held companies. According to Inc., the company took in $4.5 million and 16 employees in 2009.
The numbers make Confio “the fastest growing database performance management company for the past two years,” Thompson said. They also attracted other suitors to Confio, which expedited SolarWinds’ push to close the deal.
“We weren’t the only company looking at Confio,” Thompson said.
Thompson was predictably bullish on Confio and its main product, Confio Ignite. Ignite manages software development and service delivery for systems based on Microsoft SQL Server, Oracle, IBM DB2 and SAP Sybase databases, as well as systems that run on VMware virtual servers and physical servers, according to Confio’s website.
SolarWinds expects demand for Ignite will grow as companies that need to develop, deploy, and operate database systems make changes to accommodate the rise of “big data,” virtual and cloud-based services, and agile development processes, Thompson said.
The deal is among SolarWinds’ biggest, and Confio is a more established and better performing company than some of SolarWinds’ recent acquisitions, Thompson said. SolarWinds will largely let Confio focus on “finishing what they started” through the rest of 2013 before taking steps to integrate operations in 2014.
The acquisition will not affect SolarWinds’ third quarter earnings because it closed after the quarter ended, and the company expects Confio will add $2 million to $3 million in fourth-quarter revenue.
Analysts are not as enthusiastic and question how well SolarWinds can integrate its new companies, according to this roundup from Investor’s Business Daily. Shares of SolarWinds have dropped more than 45 percent since hitting an all-time high of 61.52 on March 14, the article noted.
From a Colorado perspective, the deal is one of a series that has seen emerging tech companies sell to public companies for more than $100 million. The list includes LineRate Systems (bought by F5 Networks (Nasdaq: FFIV) for $125 million), NexGen Storage (bought by Fusion-IO (NYSE: FIO) for $119 million), and Backflip Studios (toy- and game-maker Hasbro (NASDAQ: HAS) bought 70 percent of the company for $112 million.)
Unlike those companies, which tended to be only a few years old, Confio has been around almost a decade. Matt Larson founded Confio in 2004 and was its CEO.
Confio appears to have been bootstrapped, as the SEC database does not list any filings from the company. SolarWinds did not make Larson available for comment.
Larson will join SolarWinds as the general manager of the Confio unit, a spokesperson for SolarWinds said. The company will remain in Boulder for now and almost all the staff will remain with the company, she said.