Quest Software: On the Right Side of Barron’s

Last week, Barron’s Alan Abelson had a list of stocks to sell short for the
New Year. On the list was Quest Software
(QSFT)
.

Actually, this should be good news for Quest Software. Barron’s has missed
the boat many times with Net stocks and I think this is the case with Quest
Software.

Interestingly enough, the company started as a sleepy computer consultant.
But several years ago, Quest Software hired Vinny Smith, who was formerly
with Oracle. In short order, he has transformed Quest Software into a
leader in advanced e-business software solutions.

With a high valuation, Quest Software has made a variety of acquisitions.
There was the purchase of Foglight Software for $85 million. The key
technology is called Real-Time Application Performance Systems (RAPS). It’s
definitely complex, but critical for companies. In essence, the technology
monitors corporate computing applications to make sure performance is
optimum. Customers include Cisco, Lucent, Sun, eBay and Wells Fargo.

Another savvy acquisition was for MBR Technologies. The company develops
software for change management and version control. Basically, the
technology helps manage big application upgrades (such as for databases) —
but allow for a seamless transition.

The company has also been creating technoligies internally. Recently, Quest
Software released I/Watch for Oracle Applications. The software provides
24×7 unattended monitoring of mission critical components with Oracle
databases.

It does such things as generate trend analysis and diagnostics.
In fact, the technology helps administrators anticipate potential problems
and resolve them quickly.

But Quest Software is not a vapor company, hoping to make money. It is
currently profitable. In the third quarter, the company increased revenues
by 110 percent from last year to $18.3 million. Net income was $708,000, compared
to $627,000 in the same period last year.

As the Web penetrates corporate American, there is a huge demand for the
types of technologies that Quest Software offers. Powered by this and also
bolstered by a strong management team and product line, the momentum should
continue for some time.