Revenues Rise, but Net Income Dips for BI Vendors (RFG)

Revenues Rise, but Net Income Dips for BI Vendors

Lead analyst: John Van Decker

Actuate Corp., Business Objects SA, Cartesis, and MicroStrategy, Inc. announced mixed financial results for the quarter ended Jun. 30, 2006. In addition, Cognos, Inc. announced mixed earnings for the first quarter of its 2007 fiscal year, ended May 31, 2006.

Focal Points:

• Business Objects reported that total revenues for the second quarter of 2006 increased 12 percent year-over-year to $294 million. Revenue from licenses was down 1 percent compared to the year-ago quarter to $123 million. Specifically, license revenues from performance management solutions rose 69 percent over the second quarter of 2005 to $15 million, and license revenues from data quality and integration solutions rose 79 percent to $12 million. Meanwhile, license revenues from business intelligence (BI) solutions fell 12 percent year-over-year to $96 million, Business Objects said. The company also reported a dip in net income, from $23.1 million, or 25 cents per share, in the second quarter of 2005, to $7.9 million, or 8 cents per share.
• Actuate announced that total revenues for the second quarter of 2006 were $31.7 million, a 23-percent year-over-year increase. Revenue from licenses grew 27 percent over the same period in 2005 to $11.2 million. Net income for the quarter was $1.6 million, or 2 cents per share, said Actuate. This is compared to a net income of $3.5 million, or 6 cents per share, for the same period last year, Actuate added. MicroStrategy also announced results for the second quarter of its 2006 fiscal year. Total revenues rose 13 percent year-over-year, from $65.4 million to $74.1 million. According to the vendor, this marked the company's fourteenth consecutive quarter of year-over-year revenue growth. Revenue from licenses was $23.1 million, a 5-percent decrease compared to the $24.3 million reported in the second quarter of 2005, MicroStrategy said. Finally, MicroStrategy announced net income for the quarter fell from $17.6 million to $16.6 million, or $1.21 per share.
• Cartesis announced results for the fourth quarter of its 2006 fiscal year. The company claims record software revenues, with annual growth of 28 percent. Total license revenues for the fourth quarter grew 43 percent year-over-year, and international license revenue grew 114 percent year-over-year, according to the vendor. Cartesis also reported that 40 percent of license revenue came from new clients, and annual license revenue from performance management products grew 38 percent. Finally, Cognos reported that revenues for the first quarter of 2007 rose year-over-year, from $200.1 million to $217.0 million. Revenue from licenses was $73.7 million, compared with $71.1 million for the year-ago quarter, said Cognos. Net income was $14.5 million, or 16 cents per share, compared with $20.4 million, or 22 cents per share last year, Cognos added.

RFG believes the business intelligence (BI) and business performance management (BPM) markets will continue to see major investment from leading enterprises through 2010. Many firms have not been able to get the full expected value out of their ERP investments. Those companies have therefore invested in reporting and analysis tools to get critical actionable information into the appropriate hands within the enterprise. That investment is now shifting away from one-off reporting tools to more analytical suites for metrics management, planning, and reporting, including components for data quality and BPM. Meanwhile, although many vendors are announcing increased revenues, they are not necessarily seeing the same growth in net income. RFG believes that is due to several common factors. Most notable among these are increased marketing required to maintain differentiation over competition, increased integration and development costs for newly acquired solutions, and more money spent on research and development. The next major wave in BI and BPM will be to integrate business process management within these suites. IT and business executives should develop a plan for BI and BPM within their business application architecture and seek to replace disparate reporting tools with more enterprise-wide approaches, adding new functionality as appropriate, such as planning, metrics management and process management. (See the RFG Research Notes "Understanding the Consolidating BPM Landscape and How to React," Parts One and Two, and the RFG Research Brief "Examples of Business Process Management (BPM) Solutions and Vendors.")