In my last post “The end of Business Intelligence takeovers?”
I discussed how M&A (mergers and acquisition) activity was alive and
kicking. Today, Cognos Inc. (COGN) validated that assertion by announcing its
intention to acquire Applix Inc. (APLX) for $17.87 a share in cash for a deal
valued at $339 million or about $306 million net of Applix cash on hand.

The purchase price is a premium of 24% over Applix’s closing
price yesterday. Curiously, since Applix’s stock price had been beaten down in
the recent market sell-off, the purchase price is about even with it’s 52-week
high set on July 16. To keep things in perspective, its 52 week low set on 9/6/06 was $7.85 a share, so investors
have been rewarded. The purchase price was not cheap at roughly five times
trailing sales (above) but sometimes you have to pay to get what you need.

Applix sells Corporate Performance Management (CPM) software
emphasizing financial analytics. It has been operating on all cylinders with trailing
12 month revenue of $61 million and year-over-year growth of 45%. CPM-based
solutions, particularly involving financial processes such as budgeting,
planning, forecasting, and statutory reporting, have been growth engines for
the BI industry. Oracle, SAP, Business Objects and Cognos have all been
acquiring companies to build-out these solutions.

Several key Applix executives and other employees are Cognos
veterans. This should lessen the guess work that sometimes happens during the
due diligence prior to the acquisition and ease the transition afterwards. 

Applix’s offering based on the TM1 platform incorporates a
64-bit, in-memory multidimensional OLAP (On-Line Analytical Processing) server.
TM1 was also an acquisition. These solutions potentially provide a lower total
cost of ownership (TCO) than its traditional competitors and are oriented to
enabling self-service analytics for non-technical users.

Market Impact

Applix has over 3,000 customers with about half classified
in the SMB (small to medium business) market. This, just as its previous
acquisition of Celequest, currently marketed as Cognos Now! Operational
Business Intelligence, should expand its reach into that market. There is a
significant opportunity for BI and CPM to expand into the SMB market and to
become more pervasive in the larger enterprise market. A portfolio of products
from Cognos, Celequest and Applix may provide the platform to aggressively
pursue these markets.

It is interesting that both Applix TM1 and Celequest use an
in-memory approach to provide analytics capabilities. With the expanding use of
64-bit technology this approach may key ingredient of the BI and CPM product
portfolio. We will have to see how Cognos leverages this technology in their
product offerings.

It is not surprising that Cognos made this acquisition or
that Applix was acquired. Cognos needed to expand its offerings in order to
keep up with Oracle/Hyperion, SAP, Business Objects and Microsoft. Cognos was
emphasizing CPM, particularly to Corporate Finance groups, similar to Hyperion
since its acquisition of Adaytum but recently has been emphasizing its BI core
offerings. It appears that they are repositioning back to where the growth is,
i.e. financial analytics. And as far as Applix goes, it appears to be a common
fate of many a small BI or CPM firm to be acquired by a larger competitor.

Is Cognos through with acquisitions? Rob Ashe, Cognos CEO,
stated "We’ve had a steady pace of acquisitions and we continue to have an
appetite to acquire."

The other question is, will they be the acquirer or
the acquired?