Big Players Crowd Business Intelligence Software Market

When an 800-pound gorilla jumps into the pool, a lot of people get lashed. And that's exactly what happened last week when a Microsoft(MSFT Quote) exec said his company is getting ready to increase its presence in the $2 billion market for business intelligence software.

Business intelligence tools pull information from databases and generate preformatted reports, such as sales updates, while analytical tools add depth and sophistication to those functions. End users receive the information on their desktop computers, without help from the IT department.

The announcement that Microsoft will add reporting capabilities to its SQL Server sparked a wave of heavy trading that on Wednesday took an average of 6% off shares of the three leading BI players, Business Objects(BOBJ Quote), Cognos(COGN Quote) and Hyperion(HYSL Quote), as well as the smaller Brio(BRIO Quote) and MicroStrategy(MSTR Quote). Microsoft was unchanged.

By the end of the week, the stocks had largely recovered as investors likely realized that Microsoft's expanded BI efforts won't immediately cut into the market share of the existing players. "We believe the buzz on Microsoft's BI threat is somewhat overstated," wrote U.S. Bancorp Piper Jaffray analyst Tad Piper, whose company has an investment banking relationship with Business Objects. "Importantly, [Microsoft BI Manager Bill Baker] indicated that the beta will likely last a year, and that general availability of a reporting product will be sometime in 2004."

Moreover, says First Albany analyst Mark Murphy, "Microsoft's enterprise reporting product will only run on Windows (ignoring Unix and Linux platforms), will likely favor its own SQL Server database (running less efficiently on Oracle, DB2 and Sybase) and probably won't scale well at first." First Albany does not have a banking relationship with Microsoft or Business Objects.

Nevertheless, there's plenty of reason for investors to watch BI stocks closely. On the one hand, an overreaction to Microsoft's move could create a short-term buying opportunity. But longer term, it's important to note that Microsoft isn't alone in moving on the BI market. Database makers Oracle(ORCL Quote) and IBM(IBM Quote), and application vendors including SAP(SAP Quote), J.D. Edwards(JDEC Quote), Siebel(SEBL Quote) and PeopleSoft(PSFT Quote), have been adding analytic and reporting capabilities to their products.

< Previous

1 2 3

Next >