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Cognos Can't Shake Buyout Buzz

Shares are looking priced for a buyout.

Updated from 2:29 p.m. EST

Investors have been waiting -- and waiting -- for someone to make a move on business intelligence software maker




The stock has run up nearly 20% in the last few months, mainly propelled by "unsubstantiated takeout speculation," says Cowen analyst Peter Goldmacher, who downgraded the stock to neutral on Tuesday.

It's hard to know if the company is really in play. It may be that the "Cognos is for sale rumor" is like the "


will buy

BEA Systems

rumor" -- a takeover often talked about, particularly by investors and analysts hoping to goose a lagging stock, but never executed.

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On Monday, Credit Suisse analyst Jason Maynard noted cost-cutting efforts by Cognos and suggested that "management is doing all it can to make the company attractive to a potential buyer, which in our opinion is why the stock is trading in the low $40s."

Shares of Cognos were recently up 1% to $43.25.

One buy-side investor who chose to remain anonymous was also dismissive of the takeover rumors and disagrees with the view that management is prettying up the balance sheet for a buyer. "The Cognos sales guys I've spoken to say the new COO is telling them to concentrate on the installed base." Selling to existing customers, he said, may not generate license sales, but it does build a steady stream of maintenance revenue, a factor sometimes ignored by investors.

Like Goldmacher, Maynard sounded a skeptical note about a buyout, saying: "We don't believe anything is currently pending on the acquisition front." Moreover, "despite their cost-cutting efforts to drive earnings, the core fundamentals aren't particularly exciting." Credit Suisse does not have a banking relationship with Cognos.

Although business intelligence software, which is used to bring corporate data to employee desktops, was hot for some time, demand appears to be lagging, as very large vendors including Oracle,



and, to a lesser extent,



enter the fray.

In the past 12 months, Goldmacher wrote, "license revenues have declined 7% year over year. While management has attributed this to misexecution, we believe external factors including competition and decelerating demand are also contributing to the company's issues." Cowen makes a market in Cognos, but does not have an investment banking relationship with the company.