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Cognos to Acquire Applix to Boost Financial Performance Management

Deal nets advanced 64-bit, in-memory analytics capabilities as well as more than 3,000 customers.
Cognos announced a deal to acquire Applix this morning, agreeing to pay $339 million ($306 subtracting Applix' cash on hand) for a company that has leading-edge 64-bit, in-memory analytics capabilities. Cognos said the deal, which is set to be completed by the fourth quarter, will advance its financial performance management capabilities.

In buying Applix, Cognos will gain improved analysis and optimization of large, complex financial performance data and strong finance self-service capabilities such as business rules management. At the heart of Applix' technology is its TM1 engine, which is a 64-bit, in-memory multidimensional OLAP server designed for complex, rapid-fire analysis. While conventional technology requires the IT department to build new cubes for analysis, higher memory capacities and lower costs have made the in-memory approach possible, so users can bypass IT and get answers more quickly.

"Applix can write back to the database and do analyses in real time, so customers can add new dimensions and do what-if calculations," said Mychelle Mollot, vice president of market strategy and strategic communications. "That gives our customers the ability to do things they couldn't do before in the areas of profitability analysis, price-volume variance analysis and other sophisticated analyses in which they're constantly changing the scenarios."

In a conference call announcing the deal, Cognos executives were closely questioned by financial analysts about the potential overlap with Cognos' PowerPlay OLAP server, but Cognos' President and CEO Rob Ashe maintained the products have a complementary fit.

"The Applix TM1 engine is a high-performance, read-write store that is really good at highly analytic, scenario-based planning with rapid updates, so I would call that centralized planning," said Ashe. "What Cognos is really good at is distributed planning, with an architecture built for thousands of users working in their own location with their own models that update a centralized plan. We can position the solution that's appropriate for the job."

Cognos expects to deliver API-level integrations between Cognos technologies and the TM1 engine within the first quarter after the close of the deal, but long-range opportunity is clearly to exploit the Applix 64-bit, in-memory technology. "We can't share the road map until we close the deal, but our vision is a consolidated solution," said Mollot. "The short-term opportunity is to bring analytic extensions to our existing solutions, which would enable people to do advanced analytics in Cognos Planning and Cognos Controller."

Applix' trailing 12 months revenue was US $61.2 million with year-over-year growth of 45 percent. It has more than 3,000 customers worldwide and ranges across a variety of industries manage their business analytics needs. Customers range across a broad variety of industries, including insurance, financial services, banking, healthcare, pharmaceutical, telecommunications, manufacturing, consumer goods and retail. The customer base has a 50-50 split between midsized companies and large enterprises, with the latter group including a large contingent of SAP shops. The company's closest competitors have historically included Hyperion, Business Objects, portions of SAP's business, portions of Oracle's business as well as Cognos.

Given that Applix was founded in 1983 and has been publicly traded since 1994, why buy the company now? "Applix has been popping up more and more among our customers, and there have been demands to work with the technology," said Ashe. "They've focused on performance management in recent years, and that's right in our wheel house. The one process that we see becoming more and more important to management is the idea of analyzing and optimizing performance."