By Simon Hodgson and Stephen Phillips
Cognos Inc, the world’s number-one independent vendor of business intelligence software reported better-than-expected sales for its flagship data management tools for the quarter ended August 31, late Wednesday. Ottawa, Canada-based Cognos posted net income for the second fiscal 2000 quarter down 9.1% on the year-ago to $12.8m on revenue that rose 24.8% to $88.1m. Earnings per share were $0.30 – bang on analysts’ expectations – against $14.1m or 32 cents a share for the year-ago quarter.
Cognos saw its Nasdaq-listed shares rise 9.8% in trading yesterday to $21.7 by late afternoon, after outstripping 40% target growth for its core software products used to manage server and internet-based data by 5%. Cognos is listed on both the Toronto Stock Exchange and Nasdaq. License sales from these products generated $40.6m revenue. Adding support and service revenue they brought in $73.9m.
Investors were undeterred by the firm’s decision to slash half- yearly earnings expectations from the analyst consensus of 38 cents a share for the third quarter and 49 cents a share for the fourth quarter to 31 cents a share after Cognos announced a costly recruitment drive to sustain sales growth.
Cognos said it will add sales and services staff but declined to give numbers. In the second quarter the firm took on 140 new employees, including 90 in sales and support, to boost its headcount to 2,050. Its projections were also hit by a faster- than-expected drop in sales of its older but highly profitable software used to build custom analysis tools, as spending on Y2K compliance began to decline in the quarter. These sales fell to $14.2m from $18.7m in the same period a year ago.
Rob Zalums, the company’s UK managing director, attributed the firm’s mixed results to a Y2K spending lockdown, particularly among financial institiutions. Sales of Y2K-compliant application development tools were hit hardest Zalums said. The freeze on enterprise resource planning systems implementation however, means that firms are investing in business intelligence software to manage data, he added.
Cognos is eyeing new business in the e-commerce supply chain market, Zalums said, pointing to UK retail chain Marks & Spencer, which has invested in Cognos software across its supply partners. Zalums said this part of the business, served by report and analysis tools PowerPlay and Impromtu, would make up 30% of revenue in the next year, possibly representing more than half in three years’ time.
The share-buying frenzy reflects the importance of the firm’s business intelligence product sales which play in a market valued by industry researcher, IDC, at $2.6bn this year, and tipped to rise to $3.4bn next year. Cognos said it closed on more than 270 deals worth above $50,000 in the quarter up from 175 in the year- ago quarter.
