Thursday, November 01, 2007

Hit #182 (Business Objects)

The long rumored takeover of Business Objects (BOBJ) finally materialized a few weeks ago. The buyer, SAP, is paying around $6.8 billion in cash. The offer, of around $59.25/share, makes for a 170% gain over my average cost of $21.94. The eventual dollar amount paid may vary slightly based on the euro/dollar exchange rate - the offer is set at 42 euros. I had first bought some shares in 2004, and bought a few more again last year when the stock cratered following dismal earnings.

I had mentioned Business Objects in a few prior posts, most notably when Hyperion (Hit #150) was acquired by Oracle and even earlier while listing potential targets for Oracle.

In spite of my guessing SAP as a buyer in that post on Hyperion, this still comes as somewhat of a surprise. SAP is having trouble dealing with an aggressive Oracle, and this costly acquisition with its attendant integration risks will not help. For very long-term buy-and-holders SAP now represents an opportunity assuming this buyout will turn out to be a positive move a few years from now. A more sensible buy for SAP would have been BEA (BEAS) since its own attempt (NetWeaver) to get into application servers has failed.

With this buyout, the only major pure business intelligence software provider left single is Cognos (COGN). IBM is the most likely buyer. Cognos may still get a premium, but I like my stocks really cheap and hence won't be buying now.

A smaller reporting software/service company that will also be a target is Actuate (ACTU). The stock has more than tripled since my buy, but I will be holding onto the shares forever.

A startup to watch in this sector is Tableau Software. A public offering may be in its near future. As a user I was impressed by their charting/visualization features as well as ease of use (drag and drop). The company will be a great target for a larger player.

Proceeding to application and retail software, Oracle's offer, and its timing in particular, was surprising. It is a shame that BEA even bothered to respond (with a higher demand, but still), when in fact it could set its house in order and command a much higher price a few years down the road. Folks at BEA seem to have given up!

Among retail/supply-chain software vendors, Manhattan Associates (MANH) looks very attractive at is current price, with insider buying to support it further. The company will be taken out, hopefully at a much higher price. Retalix (RTLX) and newly public DemandTec (DMAN) are also worth watching, and buying in small numbers.

Previous hit - Navteq (#181)


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