IBM’s Cognos buy was logical
If you were looking for a ‘core business’ champion,
look no further than IBM; a truth vindicated by its announcement on November 12, 2007, to buy Canadian business software maker Cognos Inc. for $5 billion. So while this gets counted as the sixth buy for IBM in 2007 (and 23rd overall) to support its ‘Information on Demand’ business, the question remains – does it make strategic sense to buy off a firm that even failed to file its Q1 2007 results, thus failing to meet Nasdaq’s requirements?!
Seen from a competitive light, the acquisition was inevitable considering the move ahead by Oracle which bought off Hyperion on March 1, 2007 for $3.3 billion and SAP, which acquired Business Objects on October 7, 2007 for $6.8 billion. Also going by IDC estimates, the market for business intelligence is currently worth $6.3 billion; and with the other big names strengthening their arsenals, IBM had to make a prompt decision. Thus it paid 5.1 times the net revenues of Cognos (which stood at $979 million during FY 2006) – overpaid yes, but then it comes with merits aplenty! To begin with, Cognos 8 is experiencing high demand in the business software market and is therefore a good complement to IBM’s WebSphere platform. Then there is the synergy on the distribution front, wherein a tie-up with IBM would help preserve Cognos’ growing channel ties, which has resulted in the Canadian reducing its reliance on retailers (apparent from the reduced contribution of revenues from direct sales to 71% during FY 2007 from 75% during FY 2005).
Interestingly, problems in integration, which act as major stumbling blocks in most mergers would not surface here, as both have worked together for a decade-and-a-half now; and despite having common clients, have got quite used to each other’s operational strategies too. The synergy will also provide IBM’s consumers better experience on an overall basis as Steve Mills, Senior Vice President and Group Executive, IBM Software Group, asserted exclusively to B&E, “Our broad set of capabilities – from data-warehousing to information integration and analytics — together with Cognos, position us well for the changing Business Intelligence and Performance Management industry....” At the moment, it all looks like a logical move from the On-Demand giant. But in case other suitors show interest in Cognos, this one clearly becomes a case of ‘watch out for this space’.
If you were looking for a ‘core business’ champion,
look no further than IBM; a truth vindicated by its announcement on November 12, 2007, to buy Canadian business software maker Cognos Inc. for $5 billion. So while this gets counted as the sixth buy for IBM in 2007 (and 23rd overall) to support its ‘Information on Demand’ business, the question remains – does it make strategic sense to buy off a firm that even failed to file its Q1 2007 results, thus failing to meet Nasdaq’s requirements?!Seen from a competitive light, the acquisition was inevitable considering the move ahead by Oracle which bought off Hyperion on March 1, 2007 for $3.3 billion and SAP, which acquired Business Objects on October 7, 2007 for $6.8 billion. Also going by IDC estimates, the market for business intelligence is currently worth $6.3 billion; and with the other big names strengthening their arsenals, IBM had to make a prompt decision. Thus it paid 5.1 times the net revenues of Cognos (which stood at $979 million during FY 2006) – overpaid yes, but then it comes with merits aplenty! To begin with, Cognos 8 is experiencing high demand in the business software market and is therefore a good complement to IBM’s WebSphere platform. Then there is the synergy on the distribution front, wherein a tie-up with IBM would help preserve Cognos’ growing channel ties, which has resulted in the Canadian reducing its reliance on retailers (apparent from the reduced contribution of revenues from direct sales to 71% during FY 2007 from 75% during FY 2005).
Interestingly, problems in integration, which act as major stumbling blocks in most mergers would not surface here, as both have worked together for a decade-and-a-half now; and despite having common clients, have got quite used to each other’s operational strategies too. The synergy will also provide IBM’s consumers better experience on an overall basis as Steve Mills, Senior Vice President and Group Executive, IBM Software Group, asserted exclusively to B&E, “Our broad set of capabilities – from data-warehousing to information integration and analytics — together with Cognos, position us well for the changing Business Intelligence and Performance Management industry....” At the moment, it all looks like a logical move from the On-Demand giant. But in case other suitors show interest in Cognos, this one clearly becomes a case of ‘watch out for this space’.
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