Solid 3Q Results From SolarWinds

Jefferies & Co. has published a research report on SolarWinds, Inc.

after the company reported a solid 3Q that showed strength in US commercial and Federal. In the report, Jefferies writes "In testimony to the economic rebound, Solarwinds' U.S. commercial business grew 30% y/y, and it is up 36% y/y YTD vs 2% growth in the first nine months of 2009. The lumpiness inherent in Federal spending also worked in Solarwinds favor, causing Federal to spike to 25% of licenses. This exceeded the company's plan, even though Federal was down 7% y/y. Licenses rose 18% y/y in Q3. Growth for the core Orion and Profiler products was up 34%. We estimate that the Q3 ASP was $9,800, by far a record, and up 23% y/y, probably due to better contribution from Tek Tools. Better licenses lead to a strong 53% operating margin, well above the 49-50% guided range." Jefferies maintains its Hold rating and has raised the price target from $14 to $17. SolarWinds closed Friday at $18.15.