Is Solarwinds going the Big 4 way?

Last week Network management point-product vendor Solarwinds Inc.(NYSE: SWI) announced that it is acquiring Storage Management vendor Tek-Toolsfor $42M in cash and stock.

I can understand the need for the acquisition and I would say that it is probably a good move by solarwinds to fill a gap in their portfolio. We(ManageEngine) have had storage network management since 2005 (ManageEngine OpStor) and until recently Storage Network management had predominantly been a large enterprise affair. But the current drive towards server consolidation and virtualization is actually propping up the need for Storage networks and Storage  management  among mid-sized enterprises and Solarwind's need to include Storage management in it's portfolio is probably justified.

What is surprising to me is the terms of the deal. Why did Solarwinds pay $42M for a company with revenues of $4M and an operating loss of $3M? Seems that the good old days of dot com valuations are back :) Either Solarwinds is very desparate or Storage Management has suddenly become the killer "must-have" technology in 2010 ! (very unlikely, but even then does not justify the steep valuations)

Solarwinds used to be an engineering company focused on building good products. Maybe the pressure of being a public company is forcing them to show results quickly. They have acquired ipMonitor (for Server and Application management functionality), Kiwi (for log management), Lan Surveyor (for Layer 2 discovery) and now Tek-Tools for Storage management. Acquiring disparate products and integrating them at a GUI level may provide short-term boosts to revenue, but it is exactly this kind of headache that customers hate when dealing with the Big 4. (And Solarwinds would know this better than anyone else :) )

Anyway, customers who don't like this "Acquire and perform brand level integration" strategy can check out the more complete portfolio of Enteprise IT Management products from ManageEngine here.

For now I would like to wager a bet that Solarwinds is working on a free Desktop Storage management tool that can monitor a tiny unit of storage(like say 1GB) for a minuscule amount of time(60 minutes?) to bait customers similar to this. But we know that customers can use Google to find better deals like this.