FT LEX Column comment:
Autonomy's upbeat trading statement should calm fears the technology company is about to go the same way as Inktomi, which just issued a profits warning. It seems a safe bet that Autonomy will match analysts' forecasts for fourth-quarter revenues. Moreover, the company has signalled that it will soon announce more deals with software companies to embed its data-analysing technology in their products, which should boost licensing revenue.
The impact of new licensing deals, though, will not be felt until 2002. The crucial question is whether Autonomy can maintain its current rate of growth through 2001 in the face of a slowdown in US technology spending. This will not be easy.
Though Autonomy provides technology to the broad corporate software market, general retrenchment will make it harder to hit targets. At the same time, the first revenues from third-party licensing deals signed last year should provide a countervailing boost. At this point, maintaining the current growth rate, or close to it, still looks feasible.
Growth (and massively increasing returns to scale) is the key to Autonomy's valuation. Any slip, and the stock will collapse. But if it delivers on expectations, it should recover. At £15.35 it is trading at 30 times 2001 sales but - courtesy of 92 per cent gross margins - a less outlandish 100 times 2001 profits. It looks less risky than Vignette, which is loss-making. |
