Despite a continuing slip in demand for its core business intelligence software products, Business Objects SA yesterday reported strong year-end financial results, with fourth-quarter revenues jumping 22% and license revenues increasing more than 15% compared to the fourth quarter of 2005.
The BI vendor saw a 4% drop in revenues from its core reporting, query, and analysis applications during the fourth quarter, but that was more than made up for by big revenue increases from services and maintenance offerings as well as new enterprise performance management (EPM) and enterprise information management (EIM) products.
In the fourth quarter ended December 31, Business Objects reported total revenues of $370.6 million, compared to $304.6 million in the like quarter a year earlier. GAAP net income for the period totaled $35.5 million, up 1.7% from the fourth quarter of 2005. The bottom-line results were weighed down by $8 million in stock-based compensation expense that the company was required to report under FAS 123R regulations.
For the year, Business Objects reported revenues of $1.25 billion, an increase of 16% over 2005 revenues. At $560 million, license revenues were up more than 8% for the year. Net income, at $75 million for the year, was down 19%. Business Objects blamed stock-based compensation expenses for the lower full-year net earnings figures.
Company officials, in remarks to financial analysts, noted that the fourth-quarter revenues and earnings-per-share figures exceeded guidance projections released last year.
"We finished the year on a high note, with financial results that exceeded expectations," said Business Objects CEO John Schwarz. "We are carrying a strong momentum as we head into 2007."
Reduced revenue from core BI products, Schwarz told analysts, is due primarily to the company's current efforts to transition customers to its new BusinessObjects XI platform. While 40% of current customers are already taking steps to migrate to XI, he said, many are still in the planning stage and not yet ready to license new software.
Schwarz, however, said he expects that to change soon. The company plans in the first half of 2007 to add new query, OLAP, search, and other features to the XI platform with a new product called the XI Productivity Suite. On top of that, Schwarz said, customers should be ready to complete their XI migrations soon.
Already, he said, Business Objects is seeing improvement in its core BI business. Revenues from core BI dropped 12% in the first quarter of 2006, 8% in the second quarter, and 4% in the third quarter, he noted.
Other parts of the company's business, meanwhile, are reporting strong growth. Fourth-quarter services revenues (including maintenance) grew by nearly 28% to $190.9 million. Revenue from EPM products — including planning, budgeting, profit management, and dashboard applications — grew 92% during the quarter to $30 million. Revenue from EIM products — including data quality and data integration tools — was up 214% during the fourth quarter to $23 million.
Business Objects also was able to significantly grow its on-demand business during the second half of 2006. In November, the company acquired Nsite Software Inc. and its on-demand BI business. Business Objects combined the Nsite with its own crystalreports.com on-demand business, and now boasts more than 38,000 on-demand BI subscribers.
Business Objects reported growth across all of its operating geographies in the fourth quarter and for the year. Fourth-quarter revenues generated in the Americas grew 19% to $198 million, while revenues from Europe/Middle East/Africa were up 25% to $148 million following a weak first half of 2006. Revenues from the Asia-Pacific region were up 26% to $25 million.
Schwarz predicted continued double-digit growth for Business Objects into 2007. The company will increase sales and marketing investments in Japan and focus on growing its services businesses, expanding its on-demand products, and improving penetration in the mid-market. To that end, on Monday Business Objects announced a new product, Crystal Decisions Standard Edition, which targets mid-size companies. The product includes ad hoc reporting, query, analysis, dashboard, and visualization features and is intended for companies with fewer than 2,500 employees and under $1 billion in revenues. Pricing for Crystal Decisions Standard Edition starts at $20,000 for five concurrent users on a single Windows or Linux server.
Schwarz told analysts that the company hopes to grow revenues from mid-size customers to 50% of its business — from the current 35% — within the next three years.
Business Objects said it expects revenues for the first quarter of 2007 to be between $328 million and $334 million, with GAAP earnings of between 14 cents and 18 cents per share. The company expects 2007 full-year revenues of between $1.41 billion and $1.435 billion and 2007 earnings of between $1.02 per share and $1.14 per share.