Skip to main content

Business Intelligence consolidation - who's next?

We have seen a consolidation wave begin in the Business Intelligence space. IBM just bought Cognos and Oracle recently bought Hyperion. SAP just announced they are buying Business Objects after barely having time to digest their recent acquisition of Pilot Software.

There are three major database vendors at this time: IBM with their DB2 product, Oracle with their flagship Oracle database and Microsoft with their SQL Server database. IBM and Oracle now have premier, industrial-strength data analysis and reporting products in their product portfolios that complement their core database products. Microsoft has what, Excel?

Actually, Microsoft, like IBM and Oracle, has a suite of proprietary tools that do happen to integrate very well with Excel and SQL Server. Still, IT departments are not deploying the Microsoft tools for heavy-duty corporate use. Microsoft is unique among the big three by their lack of a premier reporting product. It seems safe to assume that Microsoft will be the next major player to buy one of the remaining independent companies in the BI space.

Candidates for acquisition

Informatica and SAS (privately held) have been mentioned as some of the few remaining large players in the sector. There are also a group of smaller players that might make excellent takeover targets for Microsoft. Let's take a look at some of the prime candidates.

Informatica (INFA)

Market Cap: $1.4B
Enterprise value/free cash flow: 34.6
Price/Sales: 3.82
PEG: 1.37
PE: 32
Debt: $230M

Actuate (ACTU)

Market Cap: $463M
Enterprise value/free cash flow: 21
Price/Sales: 3.5
PEG: 1.23
PE: 27.7
Debt: 0

Microstrategy (MSTR)

Market Cap: $1.8B
Enterprise value/free cash flow: 31
Price/Sales: 4.89
PEG: 1.52
PE: 22
Debt: 0

SPSS (SPSS)

Market Cap: $689.3M
Enterprise value/free cash flow: 11.86
Price/Sales: 2.4
PEG: 1.04
PE: 28.56
Debt: $150M

Characteristics of the top candidates

Informatica has its strength in data: integration, migration, data warehousing and data synchronization. This is important in large corporations where disparate data sources need to be brought together to provide a complete picture of business performance. Informatica does not offer a strong reporting component.

Actuate is the cheapest in terms of market cap and provides the investor more cash flow for the price. Despite weak revenue growth, the company has shown good growth in net income over the last several quarters and a tight control on costs. The product suite is complementary to Microsoft with a built-in Excel integration capability. Besides strong reporting tools, they offer full cube-based OLAP analytics with multi-dimensional modeling. In addition, Actuate has been a pioneer in deploying true web-based reporting solutions, a feature that expands Microsoft's capability beyond the desktop.

Microstrategy is currently trading at a fairly high valuation, closing at $106 today. After a couple of bad quarters, it has posted a very good 3rd quarter and is almost back up to the level of profitability it last saw at the end of 2006. They offer functionality comparable to Actuate but have a reputation of being more scalable and able to support larger quantities of data and more users. Their product suite includes integration with SAP and strong data mining capabilities. Still this looks somewhat like a comeback story.

SPSS has had its share price crushed recently. For much of the past year, it has suffered from uninspiring revenue growth and uneven results. It's most recent quarter, however, showed improved income based on a jump in revenue and improved cost control. SPSS offers the usual BI tools, data mining, statistics and reporting. SPSS differentiates itself from competitors by emphasizing its Predictive Analysis capability that adds a rules/recommendation engine to the output of their analysis tools to help corporations to identify which initiatives will deliver optimal results and to enable better risk management.

So who might be the best fit for Microsoft?

I think Actuate might be the best fit for Microsoft. Microsoft has been building their SQL Server database into more of an enterprise-caliber product. Actuate, who concentrates on the reporting aspects of BI, can be more easily integrated with Microsoft's SQL Server business strategy. A strong reporting layer on top of a strong database layer would be a good story for Microsoft.

The other candidates may have stronger built-in data warehousing functionality built into their product suites but I am not sure Microsoft would value that kind of capability as they are well along in developing their own capabilities in that area. Informatica has much stronger data integration capabilities that Microsoft's DTS product and, as such, Informatica might make excellent sense as an acquisition from that point of view as opposed to the general category of Business Intelligence.

Financially, Actuate is currently in pretty good shape. Compared to some of its competitors, it has been more consistent lately at delivering solid numbers. With the smallest market cap, it could be the more cost effective alternative and there would be none of the debt associated with an acquisition of SPSS.

In conclusion, Actuate plugs a hole in Microsoft's product lineup, adding a well-known and accepted reporting and analysis solution to the SQL Server product line. It could be easily integrated into Microsoft's business strategy in the BI space and, at a modest market cap, would cause little impact to Microsoft's cash hoard. And I would go further and assert that Informatica would also be a good acquisition for Microsoft. This would yield an industrial-strength, top-to-bottom solution with reporting, data integration and database capabilities.

Disclosure: author owns no shares in any stocks discussed in this article

Comments

Anonymous said…
You can dispute negative entries on your credit report. If the creditor does not respond to the query sent by the reporting agencies, then they are bound by law to completely remove the negative entry. 70% of them do not respond.
For more information on credit repair and financial matters go to : http://solutions-info.com/finance

Popular posts from this blog

Brazil - in a bubble or on a roll?

A couple of years ago, no one recognized the real estate bubble even though it was under everyone's nose. Now, analysts and bloggers are seeing bubbles everywhere they look. One of them, they say is in Brazil whose Bovespa stock market index has doubled in the last 12 months. Does the bubble accusation hold water? I don't think so and here are 7 reasons why Brazil is by no means a bubble economy: Exports have held up over the past year thanks to demand from China for Brazil's soya exports and iron ore. This was helped by the the Brazilian government's drive to improve trade links with Asia and Africa. Export diversification, spurred by a more active trade policy and increased focus on "south-south" trade under current president Lula, helped mitigate the decline in demand from OECD (Organization for Economic Co-operation and Development) countries A "sensible" economic framework has been in place since the 1990's. This has included inflation

Trade Radar gets another update

Some of our data sources changed again and it impacted our ability to load fundamental/financial data. In response, we are rolling out a new version of the software: 7.1.24 The data sourcing issues are fixed and some dead links in the Chart menu were removed. So whether you are a registered user or someone engaged in the free trial, head over to our update page and download the latest version. The update page is here:   https://tradingstockalerts.com/software/downloadpatch Contact us if you have questions or identify any new issues.

Unlock Stock Market Profits - Key #1

This is the first in an ongoing series of articles where I discuss what I feel are keys to successful investing. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. ( Click here to read the original post ) There are two basic steps to investing. First, you need to find stocks that seem to have some potential. Then you have to determine whether these stocks are actually good investments. There are many stocks that at first glance look interesting, but further research reveals that there are too many negatives to warrant taking a position. This first post in the series starts at the beginning: getting good investment ideas. Key #1: If something special is happening to a stock, it will be reflected in some kind of unusual activity in the markets. As individual investors, we will never be the first to know; however, unusual activity can be an early sign that allows us to follow the Wall Street professional