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November 16, 2010
3 Min Read
Actuate: You Can't Run, But You Can Hide
Last transformer: mid-size reporting specialist Actuate, which has relabeled itself a bit back "The people behind BIRT." Not the sweetest-sounding label, and not a change that has reintroduced the growth the company had hoped for. What was Actuate's most recent transformative step? A similar relabeling -- a puzzling one.
First, background: BIRT is Business Intelligence and Reporting Tools -- tools, not applications or solutions -- a top-level, Actuate sponsored project within the Eclipse open-source tools environment, providing reporting for Java/J2EE applications, and the core of a corresponding Actuate commercial product portfolio that the company calls ActuateOne. ActuateOne includes a newer component, Xenos "document and data transformation" and integration software.
Actuate recently changed its stock ticker symbol change, from ACTU to BIRT. "This change underscores the momentum Actuate has seen with BIRT," said CEO Pete Cittadini. "It is time to ensure that it is apparent to all that we are the people behind BIRT."
What momentum is that?
Actuate reported 3rd quarter results of $5.1 million in BIRT-related business out of non-GAAP (generally accepted accounting principles) revenue of $40.5 million, $39.8 million GAAP, so that BIRT represents under 15% of latest-quarter revenues. For this the company changed its ticker symbol?!
The biggest effect I see is to make past share prices inaccessible for many retail investors... noting that the $5.17 November 15 closing price is down from a high of $8.74 on Oct 30 2007 (and down from a bubble peak of over $34 in 2000). History is blank at Yahoo Finance, although what's past is provided by MSN Money.
After looking at Actuate's Q3 report, an IT industry executive commented to me, "In terms of their health, the 106% license revenue growth looks great until you see that $11.0M were 'related to the favorable resolution of software licensing dispute with IBM,' which means that license revenues, net of the presumably one-time item, were $6.8M *down* 20% year over year. I can't stand when people make claims like that -- as soon as you scratch the surface, what's presented as good news turns out to be bad news."
To be fair, the executive I spoke to likes Actuate's cash position but didn't love the long-term finanicals, with 2009 revenue less than 2006 revenue, licensing revenues declining in favor of a higher maintenance mix. My contact comments, "frankly, as an open-source oriented business, I'm surprised they're shrinking professional services as well. I'd think they'd be cranking that up."
In Actuate's defense, I am 100% sure that BIRT is delivering business value to users, who include software developers and systems integrators who (legitimately) use the open-source tools without paying Actuate a dime, multiples beyond what Actuate earns from the software. If that business value were reflected in licensing revenues, BIRT would represent much more than 15% of Actuate's gross income.
As my executive friend commented to me, "business model transitions are very hard. The old saw about changing the engines mid-flight is true."
Change Is Constant
Another old saw says that change is constant. (That one dates back 2,500 years to Heraclitus.) I've reported four models of BI/DW vendor transformation.
Microsoft, with SQL Server 2008 R2 Parallel Data Warehouse, is reacting to change, to technical innovation that has left it an enterprise data warehousing laggard. MicroStrategy is welcoming change, transforming itself and its products, anticipating even more.
Teradata continues to solidify rather than transform its core and has, instead, evolved its business model to build an ecosystem of partners that will carry/accompany it into new realms. And Actuate, well, seems to think that a symbolic change will transform what a new business model did not. There's much to learn from each approach and each experience.
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