In-Depth

SWOT: Cognos’ Pending Acquisition of Applix

The strengths, weaknesses, opportunities, and threats posed by Cognos' latest acquisition target

• By Mike Schiff
• 09/12/2007

The BI industry continues to consolidate as demonstrated by the signing of a definitive agreement for Cognos to acquire publicly held Applix, a company best known for Applix TM1, a powerful in-memory MOLAP engine. In addition to augmenting its technology portfolio, the pending acquisition serves to position Cognos as an acquirer, rather than, as some have speculated, a potential acquisition target.

Strengths:

• Applix TM1 is a powerful high-performance 64-bit in-memory OLAP engine well-suited for a wide variety of analytic applications; the Applix Executive Viewer (acquired when Applix acquired Temtec in June 2006) is an easy-to-use BI user interface.
• Although a niche player with revenues less than one-tenth those of Cognos, Applix is a profitable company that is demonstrating renewed financial and sales strength. Applix’s revenues are up 45 percent on a year-over-year basis.
• Cognos’ U.S. headquarters in Burlington, Massachusetts, and Applix’s corporate headquarters in Westborough, Massachusetts are approximately 40 miles apart. This facilitates communications and reduces the impact of potential relocation issues.
• When combined with its January 2007 acquisition of Celequest, the Applix acquisition serves to position Cognos as an acquirer, rather than a potential acquisition target.
• Several Applix executives (including its COO and its worldwide VP of marketing and strategic alliances) are former Cognos executives and thus familiar with the company and how it operates. Furthermore, Cognos is providing incentives to retain key Applix employees.

Weaknesses:

• The acquisition is not yet a done deal and is subject to regulatory and stockholder approvals.
• Product overlaps (including data integration and OLAP engines) need to be addressed and a roadmap with integration milestones should be published as soon as feasible.
• At a price of over five times trailing twelve-months revenue, Cognos appears to be paying a premium for Applix.

Opportunities:

• Cognos will have the opportunity to cross-sell the Applix installed base on the Cognos 8 products while cross-selling Applix’s technology to its own installed base.
• Due to its strong real-time calculation capabilities, TM1 should be well-suited for applications involving operational BI.
• Cognos should be able to leverage TM1’s capability as a strong centralized OLAP engine as complementary to its own ability to perform decentralized budgeting and planning.

Threats:

• As prospects speculate on the future of Applix products, Applix’s sales are likely to stall until the acquisition is completed and a product roadmap is issued.
• BI competitors may aggressively target the Applix installed base with offers to migrate Applix customers to their own platforms. They will try their best to create FUD (fear, uncertainty, and doubt) about future Cognos support for Applix technology.
• Financially strong BI specialists such as Business Objects could raise concerns that despite its two 2007 acquisitions, Cognos may also become an acquisition target. Database vendors such as Oracle could point to their total product portfolio and their ability to offer a complete suite of database, business intelligence, and enterprise applications.