IBM mulling Cognos bid, says analyst

Business intelligence specialist Cognos could fill a gap in IBM's product range

IBM may bid to acquire business intelligence (BI) software specialist Cognos, according to an influential analyst report. And a deal looks increasingly viable after Cognos confirmed last week that the US Securities and Exchange Commission (SEC) had completed its review of the firm’s accounting practices and found no wrongdoing.

In a research note, Mike Abramsky of RBC Capital Markets cited industry sources who said IBM may be interested in acquiring the company. The speculation follows comments made recently to IT Week by another leading BI industry insider who also claimed IBM was in the "investigatory phase " of a possible deal.

Abramsky argued an acquisition would make sense as both companies already have close ties; Cognos' reporting toolset would fill a data analysis gap in IBM's product line; and industry consolidation in the growing BI market is expected to continue.

Abramsky hinted that the weakness of Cognos' stock could even tempt IBM to table a bid soon. "IBM may be concerned about losing its opportunity to acquire Cognos, a premier BI player with a sizeable installed base, which is profitable, generates cash and has a well recognised brand," he wrote.

The subsequent resolution of the SEC review, which saw it grant approval to Cognos' accountancy practices, also removes a potential source of risk that could have jeopardised any deal.

Speaking earlier this month, Bill Hostmann of analyst firm Gartner agreed a deal would make strategic sense for IBM. "IBM's BI portfolio is not as complete as Microsoft or Oracle's and acquiring Cognos would give it a mature BI platform and OLAP [online analytical processing] technology," he added.

However, Hostmann warned that Cognos' budgeting and planning applications could prove a stumbling block for IBM as they may violate IBM's commitment not to offer business applications that take it into competition with major partners such as SAP.

Both IBM and Cognos declined to comment on the speculation.

In related news, the rate of consolidation among European technology vendors is continuing to accelerate, according to new research from mergers and acquisition advisor Regent Associates.

It reported a record 846 technology mergers took place during the three months to July, up seven percent on the previous quarter. Peter Rowell, executive chairman at Regent Associates, said in a statement that there was no sign the rate of consolidation would slow down.

"The dynamics at work within the industry are highly conducive to consolidation, convergence and aggressive financial restructuring," Rowell added. "These factors coupled with the huge amount of cash reserves currently available suggest this acquisition phenomenon is set to continue."

Experts have repeatedly advised that as merger and acquisition activity continues to soar, IT purchasers should give more consideration to the possibility of suppliers being acquired when carrying out their due diligence.