Who Will Acquire Informatica?

According to an IDC report published earlier this year, the business intelligence (BI) market is estimated to have grown 10.6% over the year to $7.8 billion in software licensing and maintenance revenues. Among BI tools vendors, SAP has 20% market share followed by SAS at 11% . In another report published in August of last year, IDC reported that the data warehousing revenues grew 15% over the year to reach $6.7 billion in 2007. Oracle led in platform software revenues with a market share of 32% in the year, followed by IBM at 21% and Microsoft at 14%. Today’s Tech Stocks company, Informatica (NASDAQ:INFA), had a market share of 4% and reported revenue growth of 14% over the year. However, Informatica has a bigger piece (19%) in the data warehouse generation software market and is a close third to IBM at 20% and SAS at 19%.

Informatica posted another set of impressive numbers in its recent quarterly results. Revenues grew 3% over the year to $117.3 million with new license revenues at $48.7 million and service revenues growing 5% over the year to $68.6 million. EPS of $0.19 was the company’s most profitable Q2 ever.

Informatica is following a three-pronged strategy. First, they are broadening their product portfolio an aim to add new products every quarter. Second, they are looking at growing beyond traditional data warehousing market and are pursuing multiple IT budgets for broader data integration. Finally, they are expanding their business reach by growing geographically.

Implementation of this strategy was evident in the recent quarter as the company added big clients around the world. For instance, for products beyond data warehousing, Informatica was selected by the investment banking division of a large global bank for IT initiatives deploying Informatica’s data quality and identity resolution tools. Duke Energy expanded its engagement with Informatica by including their enterprise-wide standard for Duke Energy’s Integration Competency Center. In Europe, Credit Suisse selected Informatica data quality tools for its private banking data warehouse to save millions of dollars annually. In Asia Pacific, Japan Post Office Network selected Informatica as its cloud computing data integration standard.

In the B2B data exchange category, Informatica is deploying focused go-to-market programs, which is helping them win customers. In the new Application ILM category, customers such as Comprehensive Health, EMC and Allergan selected Informatica to reduce storage and database costs associated with inactive or test data.

Analysts believe that cloud computing will gain traction as enterprises adopt hosted, subscription-based services to supplement or replace their premises-based BI platforms. In light of the trend, Informatica announced the PowerCenter Cloud Edition, a new product in the company’s Cloud Computing Data Integration category that should enable IT departments to deploy PowerCenter on Amazon EC2 web services infrastructure in order to integrate data managed by Amazon EC2, other cloud computing vendors, and even on-premise applications.

Infomatica is also continuing to grow inorganically, in line with the industry-wide acquisition trend. Oracle recently announced the acquisition of Golden Gate Software, a provider of real-time data integration solutions that improve companies’ IT performance and enterprise decision-making. Informatica also acquired Agent Logic, a leader in complex event processing (CEP) software. CEP enables enterprises to detect, correlate, analyze and respond to data-driven events so that organizations are more responsive to situations..

The company projects revenues of $116 million to $121 million in Q3 with non-GAAP EPS in the range of $0.18 to $0.21.

The stock is trading at a five-year high of $21.37 with a market capitalization of $1.9 billion. It remains a prime acquisition target this year. SAP, Oracle, and IBM are all possible takers.