Hyperion Software and Arbor Software Finalize Merger

Hyperion Solutions Corp. (Sunnyvale, Calif., www.hyperion.com) has begun trading on the Nasdaq Stock Exchange as "HYSL" in the culmination of a merger in the works for several months that analysts say has created a giant in the analytic application software market.

The merger between Arbor Software Corp. and Hyperion Software Corp. was announced May 26. With shareholder approval, the companies combined on Aug. 24, with Nasdaq trading starting the next day.

The deal combines Hyperion’s packaged analytic applications with a specialty in financial applications and Arbor’s OLAP technology into one company with $375 million in revenues for fiscal 1998 and more than 1,800 employees.

Bob Moran of the analyst firm Aberdeen Group (Boston) says of the new Hyperion: "They’ll be going toe-to-toe with folks like Oracle [Corp.], and we reckon that [Hyperion] is going to be a powerhouse."

The combined company’s first order of business was integrating the Hyperion Essbase OLAP tool (previously known as Arbor Essbase) with Hyperion Pillar, a packaged application for budgeting, and Hyperion Enterprise, a packaged application for financial consolidation and reporting. The company is also working to integrate the two companies’ toolsets into Hyperion Tools, a suite of client/server and Web-enabled OLAP reporting, presentation, analysis and application development tools.

The main area of overlap falls in the OLAP products both companies offered, and the emphasis clearly will be on Essbase. "For all existing customers [of Hyperion Software’s OLAP product], we will continue to support them going forward into the foreseeable future," says Dan Druker, director of product marketing for OLAP technology at Hyperion. "At the same time, we plan to make it attractive for those customers to migrate [to Hyperion Essbase]."

Shareholders of Stamford, Conn.-based Hyperion Software and Sunnyvale, Calif.-based Arbor Software approved the issuance of 0.95 shares of Arbor common stock for each share of Hyperion Software common stock. The pooling-of-interest deal leaves Hyperion Software shareholders in control of about 60 percent of the stock and Arbor Software stockholders with about 40 percent of the shares. In fiscal 1998 revenues, Hyperion Software reported roughly $295 million compared with about $82 million for Arbor Software.

While recognizing that the consolidation makes Hyperion Solutions the OLAP market leader by a few percentage points over Oracle, the Hurwitz Group (Framingham, Mass.), an industry analysis firm, has identified several key challenges associated with the merger. One challenge is that embedding the Essbase multidimensional engine into Hyperion Pillar and Hyperion Enterprise may cause problems for backward compatibility with previous versions of Hyperion products. Another risk is that shareholders may demand immediate moves to increase the return on their investments. Before the announcement, the companies had a market capitalization of $1.3 billion. The companies’ market capitalization when the deal was completed was approximately $900 million.