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Informatica: Acquisition Target?

Posted on Tuesday, Sep 25th 2007

Informatica Corporation (NASDAQ: INFA) is a leading data integration enterprise that serves over 2,850 companies worldwide for their end-to-end data integration needs. The various enterprise-wide data integration and data quality solutions that its products support encompass a vast range including data consolidation, data synchronization, data governance, and data warehousing.

INFA’s data quality products also support such necessities like data migration, master data management, and cross-enterprise data integration. There is therefore a lot of business sense for it when Cognos (NASDAQ: COGN), the BI major, comes calling for sewing up a worldwide strategic relationship.

Under the agreement made last week, COGN will resell INFA’s Data Quality and Data Explorer products as part of its performance management portfolio. Says Mel Zeledon, SVP of Global Alliances at Cognos, “With proven software from Informatica, combined with our Data Quality services focused on performance management, we can address data quality issues that span the full breadth of performance management data, not just customer data typically found in other solutions.”

As part of the data integration challenge for the on-demand world, INFA has lined up several initiatives. Its first enterprise offering is the PowerCenter Connect Option for, which is aimed at companies’ bridging the gap between their implementations and their on-premise software applications. SaaS Integration, by the way, is a hot problem for which companies such as require a solution.

The other of the same genre is its SP3 program. SP3 provides outsourcers, application service providers, the ASPs, and the SaaS vendors access to its data integration solutions on a subscription basis.

Informatica’s 2006 revenues were $325 Million, with almost an 80% gross margin. However, SG&A and R&D together ate up most of the margins, leaving a paltry $36 Million in Net Income. Current Market Cap stands at $1.34 Billion, making it an attractive acquisition target.

INFA did well in Q2/07 when its revenues recorded 17% y-o-y growth from $80.8 million to $94.3 million. H1/07 revenues were $181.4 million as against $153.9 million in H1/06 (+18% y-o-y). The share of license revenues for Q2/07 stood at $41.8 million, up 14 percent from the $36.9 million in Q2/06. Similar figure for H1/07 was $79.4 million, which was an increase by 14% from H1/06’s $69.7 million.

Notably, the GAAP net income for Q2/07 was $10.5 million that translated to $0.11 per share, up 37% from corresponding figures of Q2/06 that were $7.6 million or $0.08 per diluted share. An over 50% GAAP net income jump between H1/06 and H1/07 was even more spectacular from $12.9 million ($0.14/share) to $19.6 million ($0.21/share).

INFA’s stock performance has been lacking luster. Though it is presently trading ($15.23 level) somewhat close to its 52-week peak of $15.79, the difference between the 52-week high and low is small (52-week low $11.37).

Significantly, INFA’s price-earnings multiple (34.93) is closer to that of COGN (30.37) than to Business Objects (NASDAQ: BOBJ) which enjoys a significantly higher multiple of 53.

In my opinion, INFA is a strong acquisition target for either Oracle (who acquires everyone and their mother in Enterprise Software), or, (and this would indeed be more interesting), for The latter needs glue to stitch together all sorts of applications inside the enterprises, and Informatica would be happy to oblige. It would, however, be a relatively larger acquisition to digest for, whose own market cap is at $5.7 Billion, with an unreal P/E of 1,127.21. (CRM) has an annual revenue level close to $500 Million, and can effectively amortize INFA’s SG&A expenses to extract efficiency and profits.

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Interesting news Sramana. At one point, Hyperion announced a similar relationship with INFA. Then Oracle acquired Hyperion. Coincidently, Mel used to be with Hyperion.

Ron Dimon Tuesday, September 25, 2007 at 4:27 PM PT

Not a good match for SalesForce – they opened up a market place for vendors to write data integration solutions for SalesForce data and they don’t want to damage it by buying one of the vendors in that space. It’s also outside SalesForce core business.

The main risk of buying Informatica is losing the slogan “the Switzerland of data integration” and possibly losing OEM deals with SAP and Cognos.

Vincent McBurney Tuesday, September 25, 2007 at 8:32 PM PT


Do you really believe Informatica will remain independent in the long run? I don’t. Someone
will need to buy it, and obvious answer is always Oracle.

I do think, that is going to try to become the aggregator in the on-demand space, and will need glue. Their newly launched platform + robust integration capabilities would definitely be interesting.

And if that happens, I don’t think they need to lose the Cognos deal at all. Cognos is perfectly happy to partner with

SAP, may be. But may not be, also.


Sramana Mitra Wednesday, September 26, 2007 at 11:56 AM PT

Informatica not yet acquired!!!

K Thursday, January 21, 2010 at 3:45 AM PT