Is Cognos Next?

Industry whispers are fueling speculation but, perhaps more importantly, Wall Street has weighed in and decided Cognos is as good as sold.

The Street Speaks

"Some Wall Street analysts have downgraded [Cognos'] stock since Monday's [SAP-Business Objects] merger news, based on the view that the recent increase in the share price has already discounted a possible takeover announcement," Fred Ruffy, analyst with the investor education firm Optionetics, told CRM Buyer.

"For example, Roth Capital lowered the stock to 'hold' from 'buy' on Tuesday, saying that investors have already captured a lot of the upside from a possible takeover. Baird analysts downgraded [Cognos] today to 'neutral' from 'outperform,' based on valuation," he noted.

"According to Wedbush analysts, based on the same price SAP paid for Business Objects, Cognos could be valued at $49 or $50 a share in a takeover situation," Ruffy added, "which is where the stock sits today, at $49.40 a share."

Cognos' most likely suitors are IBM (NYSE: IBM) , which already has a relationship with the company, HP (NYSE: HPQ) and EMC (NYSE: EMC) .

For the record, Cognos is not confirming or denying speculation about its prospects. "We don't comment on that," Mychelle Mollot, vice president of market strategy and strategic communications, told CRM Buyer.

Interest in Cognos' fate is not limited to the company's shareholders, customers and whatever firm winds up with the asset -- if any does. Because it is the last of the large publicly traded BI vendors, its potential acquisition will mark a turning point for the industry.

Stick a Fork in It

"It is just a matter of time before Cognos gets acquired," Jim Sinur, chief strategy officer at Global 360, a business process management vendor, told CRM Buyer.

Application and BPM vendors are hungry for BI functionality and are willing to pay for it, he said, instead of developing it in house.

Indeed, the BI landscape is significantly smaller than it was even a few years ago, with many smaller niche vendors having been absorbed by medium-sized and large software companies.

"The independent BI market is pretty much over," Sinur said. "BI is now part of the software stack." One exception, he said, might be Information Builders.

Cognos' Mollot, for one, disagrees with the premise that the halcyon days of the independent BI vendors are over.

"I absolutely see a viable, stand alone BI market continuing," she told CRM Buyer. "Customers will continue to have heterogeneous environments, multiple databases, multiple ERP (enterprise resource planning) systems. Meanwhile, these firms are also making their own acquisitions. All of this infrastructure and data needs to be supported."

Companies tend to prefer independent vendors because of their focus on the functionality, she added. For instance, SAP's acquisition of Business Objects means that at least some of the French vendor's resources will be devoted to integration with SAP, even though it will remain a separate entity.

"While they are integrating, we will be innovating," Mollot said.

Acquisition Landscape

The general trend, though, points to acquisition, Gaurav Verma, SAS ' worldwide marketing manager for BI, told CRM Buyer. "There seems to be a plateauing of capabilities from ERP companies. These applications have traditionally looked at bottom line costs and ways to manage those costs."

The ERP market is now mature, so vendors are looking to drive growth by offering functionality around top line growth metrics, and they see BI as a way to do so, he said.

BI firms that can stay independent will do so, Verma predicted.

"This is a great time for BI vendors -- more and more firms are recognizing the value of the application," he pointed out. "Furthermore, it is a great advantage not to be under the pressure of quarterly earnings. Instead, we can concentrate of driving results for customers."