SolarWinds Falls After Outlook Displeases Wall St.

A weak business outlook sent shares of software company SolarWinds tumbling Thursday.

SolarWinds said its second-quarter net income grew about 18 percent as its license and maintenance revenue increased from a year earlier. But its license revenue fell short of the company’s own projections, and it issued third-quarter and full-year outlooks that missed Wall Street forecasts.

SolarWinds shares fell more than 21 percent in after-hours trading.

President and CEO Kevin Thompson acknowledged that the company failed to generate the level of new license sales that it had anticipated, and noted that sales in the information technology sector have been difficult and inconsistent with the company’s expectations in the first half of the year.

Thompson said SolarWinds plans to invest aggressively in new product features, branding and other components of the company’s product development and sales operations in the second half of the year.

“Although we have had a slow start to 2013 relative to our outlook, our confidence in our core business is high,” he said.

SolarWinds reported net income of $22.8 million, or 30 cents per share, for the three months ended June 30. That compares with net income of $19.4 million, or 26 cents per share, in the same period last year.

Excluding the impact of payroll taxes, acquisition-related costs and other special items, SolarWinds’ earnings amounted to 40 cents per share.

On that basis, the company exceeded analysts’ consensus forecast, which called for earnings of 36 cents per share, according to FactSet.

Revenue rose 21 percent, to $77.5 million from $64 million a year earlier, but was below the $78.9 million analysts had expected.

SolarWinds said its license revenue rose 6 percent to $31.1 million, while maintenance revenue grew 31 percent to $45.4 million, a company record.

For the current quarter, SolarWinds expects to post adjusted earnings per share of between 35 cents and 36 cents, on $84.7 million to $87.2 million in revenue. That’s below the adjusted earnings of 38 cents per share and $90.6 million in revenue analysts were anticipating.

For the full year, the company forecast adjusted earnings per share from $1.51 to $1.54, on revenue between $322.7 million and $327.7 million. That also fell short of Wall Street’s projections, which called for adjusted earnings of $1.56 per share on $337.3 million in revenue.

SolarWinds shares ended regular trading up 82 cents, or 1.8 percent, at $46.09. The stock slid $9.84, to $36.25, in extended trading. Shares are down 12 percent this year.