Cognos acquires Applix

On September 6th 2007, Cognos announced its intention to acquire Applix paying $17.87 per share, valuing Applix at $339 million in cash, around 6 times annual revenues. Mike Morrison, their COO, will have an especially big smile on his face. When he joined Applix from Cognos in 2004 Applix’s share price was around $4.

Founded in 1983, Applix is a BI industry stalwart. Applix has been on the brink of extinction a number of times (for example, its shares were valued as low as 48 cents in 2001) and it never really exploited the meteoric BI industry growth as annual revenues remained static at around $25m to $30m. Meanwhile Business Objects (founded seven years later in 1990) became a billion dollar company.

Applix’s technology has always been good—their 64-bit TM1 read / write OLAP engine is well regarded, offering ease of use and advanced functionality and is fast to deploy and competitively priced.

Aided by the astute acquisition of Temtec, a European reporting vendor with 500 customers, Applix grew revenues from $37m in 2005 to $52m in 2006, and Applix forecasted $67m–70m revenues for 2007. Applix’s performance impressed the market and its share price went up steadily. Then Cognos’ bid added 22% to the share price overnight.

The winners of this acquisition? 1. Applix’s shareholders. Cognos could have bought the company for a fraction of this price a few years earlier. 2. Applix’s customers. Coming into the Cognos fold gives them a truly strategic BI platform (Cognos 8) and a proper well-resourced high quality global services and support set-up.

Cognos has acquired Applix near the top of the market. 6X annual revenue is a generous offer—especially when Spotfire was acquired for around 4X by TIBCO recently. Some might say the acquisition provides a response to Oracle acquiring Hyperion and Business Objects acquiring Cartesis in the finance CPM market. But Applix is no Hyperion or Cartesis, and carries neither their market weight, nor their depth and breadth of their “solutions for the office of the CFO” resources.

The acquisition does add 3,000 BI or CPM customers to Cognos’ stable and re-enforces Cognos’ market visibility and long term commitment to the BI / CPM market. It may even add some short term growth in Cognos’ licence revenues. The strategic market impact is likely to be less dramatic.

Cognos’ CEO Rob Ashe admitted that integration of the two companies’ products would be “modest”. “Overall, we anticipate a relatively smooth integration given the shared vision and familiarity between the two companies and many shared customers,” he said. I interpret this as meaning that Applix will become more of a Business Unit of Cognos, rather than a central integral component of Cognos 8.

So who is the next BI / CPM company to be acquired? QlikTech and Actuate look obvious candidates. But both are now growing revenues nicely, and so neither will be cheap. But this didn’t dissuade Cognos, and is unlikely to dissuade other acquisitive predators wanting to accelerate their BI market ambitions. The shareholders of these potential acquisition targets will no doubt cling to that hope.