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Autonomy Going Gangbuster

Posted on Monday, Apr 13th 2009

While most stocks across tech sectors are reflecting the economy’s depressed condition, Autonomy (AUTNF.PK)(LSE:AU), a leader in unstructured data management software, has been growing since its founding in 1996 and posted impressive results for the December quarter.

Autonomy is a key player in the enterprise search market, especially for unstructured data, and can credit its growth to strategic acquisitions. The company ended last year with revenues of $503.2 million, recording growth of 47% over the year. EPS also grew significantly, by 79% over the year to $0.68 for the fiscal 2008. For the quarter ended December 2008, revenues grew 26% to $145 million with EPS growth of 92% to $0.25.

Autonomy continued to expand its market leadership with the introduction of new technologies such as the Autonomy ControlPoint, which brings comprehensive information governance capabilities to Microsoft SharePoint. It also launched the world’s largest managed data archive during Q4 of last year. As more business processes are being done online and concerns about data security are mounting, the company launched a new Situational Awareness Web Portal to revolutionize companies’ security control centers.

A couple of years ago, the company acquired Verity, which was its largest rival, and earlier this year announced its largest M&A transaction in the quarter by shelling out $775 million for Interwoven, whose products aim to improve human interaction with information. With Interwoven’s customer base, Autonomy will have additional scale and significant cross-selling opportunities, especially in the worldwide legal and compliance industry. It expects to be able to accelerate the delivery of next generation unstructured information management software through this acquisition.

The enterprise search market is dominated by three key players: Microsoft, Oracle and Google. There have been many significant acquisitions in the Business Intelligence portion of the industry in the past few years. Oracle acquired HyperionSAP bought Business Objects, and IBM acquired Cognos, leaving few players of value left to acquire.

Autonomy happens to be one of them. Many analysts see the company as a leader, with expectations of nearly 35% growth in EPS in the current difficult year. The company is no longer a pure play search vendor and boasts of search-based applications catering to market demands of better information-centric software. This past October there were rumors that Oracle wanted to buy Autonomy, but IBM will also be in the running. It is, however, a slightly expensive buyout with a current stock price of $20.10 and a market capitalization of nearly $4.8 billion.

In fact, I would love to see Autonomy use its excellent momentum to become a larger and more powerful independent company, and do a roll-up in the unstructured data/enterprise search, content management, data archival and related space. In that vein, Mimosa Systems could be an excellent acquisition.

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