MGI Research

Friday, Oct 23rd

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Non-linear changes in software industry technology and economics are up-ending the traditional notions of competitive barriers and valuation parameters. Agile development techniques are dislodging traditional economic assumptions of the buy vs. build decision. New mobile and social platforms are challenging software suppliers technologically, while SaaS and the cloud are shaking their sense of economic certainty. Will the future of the traditional software industry can end up being that of an asset in decline, or one experiencing explosive growth and a dramatic increase in valuations? In this context, MGI coverage of Software focuses on the interplay between incumbent and emerging software trends, technologies and vendors.

  • Which established vendors are best positioned to succeed in the current software environment? Which are most at risk?
  • Can innovation propel legacy software vendors into the new world of Software 2.0?
  • Is social media an opportunity or a threat to software providers?
  • What does the M&A landscape look like for vendors, investors, and users?
  • Is the Buy vs. Build debate back form the dead? What is the new economic landscape?
  • How will Microsoft, Oracle, Salesforce, and SAP drive the competitive landscape in software? Will a new $1 billion vendor appear?
  • What can CIOs do to avoid lock-in into obsolete software technologies?
  • What are the emerging best practices for software licensing and procurement?

Companies covered include Microsoft, CA, BMC Software,, SAP, Oracle, Adobe and many others - public and private.

i2 - All Dressed Up

After a tumultuous year, i2 Technologies is primed for a significant event.  For all the drama of the past 24 months of i2 Technologies™ history, the next 12 months may prove even more exciting.  While its MGI Index (MGI-X) and MGI Change Vector (MGI-CV) scores remain unimpressive and the first quarter results failed to stop the erosion of the business, the path to selling the business has never been so clear, and the list of potential suitors says as much about the supply chain and logistics software sector as it does about i2. In spite of its broken deal with JDA Software (NASDAQ: JDAS; MGI-X: 918), we see an increasing probability of an exit transaction for ITWO in the 2009 to early 2010 timeframe.

Attachments: (For Subscribers)
Download this file (MGI_Research_-_i2_In-depth_June_16-1.pdf)i2 - All Dressed Up

Oracle Acquires Sun Microsystems: Strategic Impact at a Tactical Price

Oracle's acquisition of Sun (Nasdaq: JAVA) comes at a tactical price but carries with it major strategic benefits to Oracle as it stands to reap benefits of a more vertically integrated stack. The accretive nature of Oracle's bid for Sun is underscored by the efficiency of Oracle's business model. When Oracle completes this deal, it will be strategically positioned vis a vis both IBM and HP, and will be able to compete more effectively for centrally controlled IT budgets. This transaction puts significant distance between Oracle and SAP, as Oracle will no longer be just a software company. To see the full content of this Research Note, please CLICK HERE.

Software Maintenance Revenue - Sacred Cow or Hamburger Meat?

The current economic downturn has given rise to numerous pieces of fundamentally good analysis on software company valuations that use software maintenance payments as a basis for valuing a business. Comments like "this company sells at only 2X or 3X its maintenance revenue stream" have popped up in numerous conversations with tech investors and sell side analysts as well as in Barrons™. To access the full content of this Research Note, please CLICK HERE.

Oracle's Bid for BEA: A Mexican Stand-off?

The events in the potential Oracle acquisition of BEA Systems seem to be following a B-movie script with tough talking characters angling to resolve their differences publicly while not losing face. It isn't a Mexican standoff just yet - the third opponent - another bidder or a white knight, is still missing and making it hard for BEA. Carl Icahn - a likely participant in this shoot-out - is sitting this one out for now. To access the full content of this Research Note, please CLICK HERE.

SAP Buys Business Objects: Defensive Move?

On Sunday, October 7, 2007, SAP AG (NYSE: SAP) announced an agreement to acquire Business Objects(Nasdaq: BOBJ) via a cash tender offer valued at EUR4.8billion. The acquisition of Business Objects was not unexpected - the company has been in on-again, off-again conversations with Oracle (Nasdaq: ORCL) and other potential suitors for many months. The French press had leaked news of the SAP/BOBJ dialogue several weeks ago. Did SAP act defensively to thwart perceived interest in Business Objects by Oracle and others? Did SAP - as a result, pay too much for technology that is either at its peak or will require significant investment in the next five years? To access the full content of this Research Note, please CLICK HERE.

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