SolarWinds MSP Business Spinoff Expected by Mid-2021

The spinoff of SolarWinds‘ MSP business into a separately traded public company is proceeding with completion anticipated in mid-2021.

That’s what president and CEO Kevin Thompson told investors during SolarWinds’ third-quarter earnings call. In August, SolarWinds said it was exploring a potential spinoff.

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.

Both Companies Would be Market Leaders

SolarWinds’ Kevin Thompson

“Based on the additional work we have done over the last 90 days, we continue to believe in the rationale for the separation from strategic operational business growth and value creation perspective as the separation of the MSP business from SolarWinds will create two independent companies that are both market leaders, each focused on their different businesses, customers and strategic initiatives,” Thompson said.

Each business would have the “freedom” to develop investment plans unique to the dynamic and maturity of the markets which they serve, he said.

“It is our intent to proceed forward with the separation process, although the structure and timing of the transaction still must be finalized,” Thompson said.

Pending board approval, the separation would occur during the first half of 2021, he said

“However, there is still a number of legal, organizational and operational items that must be accomplished over the coming months to finalize the definitive proposal for final separation for approval by our board of directors,” Thompson said.

John Pagliuca, president of SolarWinds’ MSP business, will be CEO of the new MSP business.

New CEO

In addition, SolarWinds is searching for a new CEO to succeed Thompson. The new CEO will lead the core IT management business.

“We’ve engaged an outside executive search firm to lead this search,” Thompson said. “And they have presented a number of qualified and interested candidates to the search committee of our board of directors. The search committee has interviewed several candidates and believe that the pool of interested candidates is of high quality. Based on the quality of the candidates that have been interviewed thus far, we hope to be able to complete the search process in a relatively short period of time.”

MSPs use SolarWinds technology to manage the IT environment of over 500,000 SMBs in all parts of the world, Pagliuca said.

“While we saw a slight acceleration in our MSP business as a result of COVID-19, our most recent trends indicate that the MSP market is beginning to reaccelerate,” he said. “However, due to the deceleration we saw around our MSP business in the second quarter, we expect net retention rates to drop slightly in the fourth quarter before beginning to improve in early 2021.”

Last week, SolarWinds announced it’s acquiring SentryOne. SentryOne’s products will expand the support SolarWinds can offer for Microsoft and Microsoft Azure environments.