Mike Davis
Sub-prime will provide two-year boost for Autonomy
After declaring record earnings for the quarter and the year, Mike Lynch CEO of Cambridge, UK-based Autonomy said in addition to a good pipeline for 2008 he is expecting a positive bounce resulting from the US sub-prime debacle through banks adopting Autonomy's technology.Comment: Lynch announced the 19th quarter of increased revenues at $115m, 57% up from Q4 2006, and a record profit before tax (IFRS) at $32.9m, 51% up on 2006. For the year as a whole total revenues were up 37% to $343m and profit before tax was $91.5m, with gross margins (adjusted) being 89%.The dollar and growth were ahead of the financial analysts' expectations, but Lynch left them with his usual conservative prediction of 10-20% for 2008.In an acknowledgement that one of its two principal rivals in the enterprise search arena, Norwegian Fast Search and Transfer (FAST) is being acquired by Microsoft for $1.2bn, Lynch devoted a whole slide of his presentation to the subject. Autonomy sees the acquisition as positive for itself, in that a large proportion of existing FAST customers are UNIX/Java, and may have concerns with Microsoft's long-term support. When describing the year ahead Lynch highlighted that the fall-out of the sub-prime issue in the US is that banks were having to secure and analyse very large amounts of disparate information in a very short timescale, exactly where Autonomy positions its Meaning Based Computing message, and reflected in the recently announced $70m deal (see EuroView Daily, 7 January) with a global bank. To illustrate how significant the demand being seen by Autonomy was, Lynch stated that the cycle time for that deal was two months, and that the company was in the first instance moving people across to support the sales and deployment activity, and it would be supporting its partners to undertake the work in the near future.There was some speculation that after the FAST acquisition by Microsoft, Autonomy would be the next on someone's shopping list. However, with a current market capitalisation of around $4bn, and a reportedly bulging pipeline for 2008, only one of the other software infrastructure behemoths such as Oracle, IBM or EMC could realistically afford to pay the 'top dollar' required. Overall in 2007 Autonomy has certainly demonstrated its difference from the rest of the search and discovery pack, and positioned itself truly as an enterprise software infrastructure vendor through the acquisitions of ZANTAZ and Meridio. Lynch has every right to think it is well positioned to survive and even benefit from the potential turbulence of a 2008 downturn.
