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Cognos' Results Reflect BI Software Strength

In another sign that enterprises are buying business intelligence software at a healthy clip, Cognos reported a record $210 million in revenue for the third quarter, 22 percent greater than the year-over period sum of $172 million.

The results helped drive the company's profit to $34.5 million (37 cents per share), better than the 32 cents analysts at SG Cowen had expected of Cognos and up by 42 percent over the $24.2 million, or 26 cents per share, in profit during the same time last year.

The Burlington, Mass., provider of BI and corporate performance management software tallied nearly $92 million in new license revenue during the quarter, an increase of 26 percent from the same fiscal third quarter last year.

SG Cowen said it was recommending Cognos to longterm investors because of the company's leadership position in the space and its strong product performance. This includes ReportNet, which has earned nearly $100 million in sales since its launch in September 2003.

SG Cowen was also encouraged by Cognos' record 15 contracts worth more than $1 million, as well as 127 deals over $200,000 for Q3. Cognos inked major new contracts with Boeing, DaimlerChrysler and Staples.

"This data confirms feedback we have been getting from the channel that interest in BI solutions continues to grow," SG Cowen said. "Specifically, the market is looking beyond simple query and reporting to planning and other performance management applications, and we believe that Cognos is the best positioned vendor to capitalize on this trend."

Business intelligence (BI) software helps corporations gain greater insight into the performance of their core businesses. It compiles information in easily readable graphics and charts. Business managers use the results to determine strengths and weaknesses in lines of business, from employees to supply chain management to sales execution.

In the past two years, many BI software vendors recognized reporting technology as the next big thing. Cognos built ReportNet from scratch. Major rival Business Objects purchased reporting specialist Crystal Decisions in 2003.

Beyond highlighting the fundamental difference in philosophies in the two companies -- build versus buy -- the moves reinvigorated competition in an otherwise quiet space.

Hyperion snapped up Brio Software two weeks later and Actuate nabbed Nimble Technologies one week after that.

Cognos and Business Objects quieted down somewhat after that, racking up customers and sprucing up their software portfolios. But between the solid Cognos Q3 and a forthcoming major software upgrade from Business Objects next month, the rivalry could heat up again.

Going forward, Cognos said it expects revenues of $804 million to $809 million for the full fiscal year 2005 on earnings-per-share of $1.33 to $1.36. SG Cowen is more bullish, expecting EPS of $1.56 on sales of $892 million for next year.