Andy on Enterprise Software

Mr Blue Sky

November 5, 2007

The round of recent quarterly results continued with Microstrategy. We have observed a strong performance by Informatica yet a weak one from Business Objects, whose execs had cited difficult market conditions e.g. the global credit crunch, as the reason for poor demand (as distinct from any conceivable errors on their part). Indeed Informatica is in a related but distinct sector to Business Objects, so perhaps the Business Objects results were an indicator of something amiss with the business intelligence sector rather that this just being special pleading on the part of management. Microstrategy is a direct competitor to Business Objects (along with Cognos, SAS and others such as Actuate and SPSS), so its results should cast some light on the issue.

Microstrategy’s numbers were in fact what we Brits might describe as “stonking”. Licence revenue, the key health indicator of a software company, was up 23% from a year ago. Overall revenue of USD 95.8 million was also 23%, reflecting a broad-based increased in services and maintenance revenue as well as new licences. Operating margins were a tasty 29.8%, meaning that the chunky increase in revenues did not come at the cost of disproportionately increased marketing expense. This strong performance shows up the Business Objects quarterly results for what they were, a serious stumble in a sector that appears otherwise buoyant. Perhaps the Microstrategy CEO deserves his new plane after all.