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Friday, July 07, 2006

Business Objects: A Bargain?

Stocks: (BOBJ)(HYSL)

Business Objects, the French provider of business intelligence software, was slaughtered in the market for missing numbers. The company has a good business offering analysis and data integration services for large businesses, but investors were merciless, dropping the stock 25%.

Business Objects has blue chip customers like adidas and the Univeristy of Michgan, so its problem is not demand for its software and services.

The question is whether missing its forecast is reason for a drop of this magnitude.

Maybe not.

Before its announcement about quarterly revenue, the shares of the company were below $27, on a 52-week high/low of $43.57/$24.85. So, the stock was already down 38%. It now trades at $20, off much more than half.

The company's Q2 is now expected to yield revenue of $287 to $291 million. Forecasts made in late April were for the numbers to be $295 million to $300 million. GAAP EPS is expected to be between $.05 and $.08 for the quarter instead of the last guidance of $.10 to $13.

It is worth noting that revenue in Q2 05 was $262 million, so revenue could rise 11% quarter over last year's same quarter.

The company has been a growth engine. Revenue nearly doubled from 2003 to 2005. And operating profits moved up more than three-fold.

Business Object trades at about 2 times sales. Hyperion, a slightly smaller competitor trades at 2.4 times sales.

Business Objects may be getting attractive.

Douglas A. McIntyre can be reached at He does not own securities in companies he writes about.

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