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Big Blue Bulks Up BI Muscle With Cognos Buy

Big Blue Bulks Up BI Muscle With Cognos Buy

The lines on a new battlefield are now drawn: IBM has snapped up Cognos, the last of the big pure-play business intelligence vendors. The deal follows earlier acquisitions of Business Objects and Hyperion by SAP and Oracle respectively. Now, the big question is how well -- and how quickly -- these tech giants will be able to integrate their BI acquisitions.

By Erika Morphy CRM Buyer ECT News Network
11/12/07 1:57 PM PT

Another best-of-breed business intelligence vendor has been snapped up: This time, it is Cognos, which IBM has agreed to acquire for US$5 billion in cash, or roughly $58 per share.

The move was widely anticipated, given the recent acquisitions made by IBM's rivals in this space. Earlier this year, SAP announced it would acquire Business Objects for about $6.78 billion. That came on the heels of Oracle's acquisition of Hyperion for $3.3 billion.

After the Business Objects buy, speculation went into overdrive as to which company would be next, with IBM, Hewlett Packard and EMC considered the most likely to make a bid for Cognos, the last pureplay business intelligence vendor standing.

The market welcomed news of the deal, according to Fred Ruffy, analyst with the investor education firm Optionetics.

"The stock was recently at $57.25, and the move in the shares toward the proposed takeover price reflects investor confidence that the deal will go through," he told CRM Buyer.

"IBM shares reacted positively as well. IBM was up $2.95, or nearly 3 percent, to $103.21," Ruffy noted.

The merger makes it more likely that Cognos customers will also use IBM's data integration products in the future, he pointed out.

Prescient Investors

It was pretty clear something was brewing in this space prior to the announcement Monday morning, Ruffy remarked.

"Share of Cognos rose 5.2 percent last week, even as other tech stocks suffered significant losses," he observed. "In addition, on Friday, more than 12,000 Cognos calls traded on the day, which is an unusually large amount of call volume for the company."

Calls increase in value if a stock moves higher in price, Ruffy explained. "Taken together, the unusual strength in the share price and the noticeable jump in call volume late last week suggests that some savvy players might have correctly anticipated the merger announcement."

Beyond the Deal

With the deal itself out of the way -- except for the usual acquisition-related activities -- customers and competitors alike are wondering what will be next for the Cognos application, as well as for the business intelligence space in general.

Looking at the big picture, it is good news for providers of business intelligence functionality, David Nour, managing partner at Relationship Economics, told CRM Buyer.

"IBM's acquisition of Cognos validates that corporate clients want more than raw data provided by traditional enterprise applications," he said. "They need near-real-time actionable insights to make immediate and appropriate course corrections in their execution plans."

Even smaller businesses are beginning to understand that they must incorporate this functionality in their operations, said David Abdo, CEO of Bitam. These companies "are realizing that BI helps employees make better and quicker decisions," he told CRM Buyer.

Successful Integration

Any shifts in the competitive landscape, though -- both on the company and sector levels -- will depend on how well these larger firms absorb and integrate their new BI platforms.

Chances are, the evolution of both BI and ERP (enterprise resource planning) products at these companies will slow down, Abdo said, because both companies will be preoccupied with merging their technologies for the next two years.

On the other hand, there's the argument that these companies are spending a considerable amount of money -- in SAP's case it is the largest acquisition it has made to date -- and are unlikely to give integration anything but their full attention. The result for the industry could be a new -- and higher-valued -- business base for BI functionality.

"If IBM can successfully integrate Cognos to provide that insight not only from its own data, but also from multiple sources both within as well as external to the organization, it will help shift the perceived BI value proposition to one of a highly decentralized -- think Wikipedia-like -- model," said Relationship Economics' Nour.

"This broader perspective allows managers and leaders to derive a tighter link between their strategic scanning of the market and tactical execution," he concluded.


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