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  1. Technology
January 27, 1998

BUSINESS OBJECTS EMERGES FROM THE FIRE BLOODIED BUT UNBEATEN

By CBR Staff Writer

After its annee horrible in 1996, French business intelligence tools provider Business Objects (BO) has reason to be pleased with 1997 – or at least, with the last few months. It is, after all, still independent; it is growing; it is making some small profits. And its products are receiving excellent reviews. Although CEO Bernard Liautaud, the French entrepreneur who founded the company in Paris in 1990, will say he is not at all surprised by the company’s survival and the beginnings of a recovery, there are many investors in the Nasdaq-listed company in the US who are. In late 1996, the company’s stock plummeted on a succession of negative announcements. Even by the summer of 1997, its stock was trading at less than a fifth of its 1996 peak. But since then, it has been mostly good news. Its third quarter revenues hit a record high, with revenues of $28.5m, compared to $18.5m for the same period a year earlier. Revenues for the nine months ended September 30 were $78.2m, a 32% increase on 1996. And the company is returning to profit, with net income of $0.2m in the third quarter. The revenue growth is being driven by strong sales of the eponymously-named BusinessObjects data analysis tool; over 575,000 licenses have been sold to date and, in the last quarter, revenues grew 64% in the US and 85% in Germany. Furthermore, in this highly competitive market, the BusinessObjects 4.0 product has won a series of prestigious awards. DBMS magazine, IDC, and the Oracle Technical Journal all rated BusinessObjects above the competition in key areas.

Business Objects net income

Reviews of the new BusinessObjects 4.1 suite have also been generally positive. PC Week praised its ease of use, its improved fault tolerance and programmability – although reviewers commented on the program’s high price and said that 4.1’s web publishing capabilities are still static and limited compared with rival packages from Cognos and Seagate (BO claims this situation will be alleviated with the arrival of WebIntelligence, BO’s thin-client decision support solution, now in beta). Even if Business Object’s share price does not yet reflect it, the strong sales and favorable reviews suggest a strong recovery for the company may yet be possible. The global business intelligence tools market is valued at $1bn and is set to grow by 140% over the next two years, according to analysts at Gartner Group. Business Objects is well placed to grow with the market – according to Boston-based research firm, Yankee Group, BO and Cognos together account for about 70% of the desktop decision- support market. But investors have, of course, been burned before. In 1996, boosted by strong growth, big contracts with companies such as Shell, and investors’ excitement surrounding its meta-cube end-user tool and release 4.0 of BusinessObjects, the company’s share price soared. Then it all turned sour. BusinessObjects 4.1 missed its release date and was then rushed to market in less than perfect shape. There followed bugs, bad reviews and even more product delays, wounding sales and dragging down earnings. Then there was a scandal involving revenue recognition and the actions of its German management. BO’s stock price plummeted. But all of this is history. The biggest problem for Business Objects now is holding on to its substantial market share in the face of strong competition. Yankee analyst Brian Murphy notes the presence of two other competitors (other than Cognos): Brio Technology is well funded and will soon file for an initial public offering, he says. He also directs attention to Seagate Software’s Crystal Info which, he says, has a huge number of installed seats, much larger than either BO or Cognos. But these are mostly supplied free as part of Microsoft’s Visual Basic. Hardly any of these are being used, says Murphy. Murphy sees little technical difference between any of the products in the market. The functionality that these products deliver is not new or radically different, he says. For Business Objects, now gradually being rehabilitated, the improvement in profile should, however, help to improve sales.

This article first appeared in Computer Business Review.

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