Quick Comment on Business Objects 3Q Financials

Business Objects (BOBJ) today announced 3Q07 financial results that were in-line with the company’s pre-announcement on October 7th, the same day the Business Objects announced its acquisition by SAP.

In terms of valuation, I’m impressed that Business Objects was able to get a 20%ish premium over its recent (pre-acquisition) stock price, given that the company was announcing a shortfall that, in theory, should have caused a 20% stock price drop. That is, in theory, offering yesterday’s stock price on the day of pre-announcement is roughly equivalent to offering a 20% premium. What Business Objects got, by my back-of-the-envelope analysis, is closer to a 40% premium. Bien fait.

One thing caught my eye today in reading Pat Walraven’s (JMP Securities) coverage of BOBJ’s third quarter. See this sentence from his report entitled Business Objects: Expecting License Revenue to Fall Off (or from the company’s earnings release).

Cartesis S.A. and Inxight Software contributed approximately $21 million in total revenues.

Wait a minute, I thought. $21M strikes me as low.

Business Objects paid $76M for Inxight, which I’m guessing was 3x $25M in TTM revenues. Business Objects paid ~$300M for Cartesis, which was 2.4x $125M in revenues, as mentioned in the boilerplate of the acquisition press release. So whats $150M divided by 4? $37.5M.

So normally, I’d have guessed that Inxight and Cartesis together would have provided $37.5M in revenues — not $21M — and that’s not accounting for any growth. Not sure if anyone else caught this, and / or if they have a good explanation, but to me $21M seems light given the revenue histories and prices paid.

One response to “Quick Comment on Business Objects 3Q Financials

  1. Good observation Dave. As always, Nigel Pendse has made some interesting observations here: http://www.olapreport.com/consolidations.htm#BOBTW, last I checked SAP gives away their BI tools and technology with Netweaver. I suspect that will be an interesting conversation with customers who now what the BOBJ stuff for free.

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