Informatica (INFA-NNM)
by JMP Securities (7.59, March 14)
Market Outperform. IBM announced plans to acquire Informatica's leading competitor, Ascential Software, for $1.1 billion, or $18.50 per share, representing an enterprise value of two times 2005 revenue estimates and an 18% premium over the Friday [before last's] closing price.
While IBM is a tough competitor, overall, we believe the acquisition represents a net positive for Informatica as it validates the importance of the data-integration space, and is likely to boost Informatica's relationships with other partners. In particular, we believe partners like Oracle, SAP and Accenture are now likely to have a heightened appreciation of Informatica's value as an independent data-integration vendor. We are leaving our 2005 and 2006 pro forma earnings-per-share estimates unchanged at 30 and 40 cents....
IBM represented 18% and 16% of Ascential's annual license revenues in 2002 and 2003. In 2004, IBM ceased compensating its software sales representatives for Ascential's software -- a decision that helped to drive down Ascential's stock price and probably helped to make this deal possible. Informatica, on the other hand, has never disclosed IBM as a 10% or greater customer...[W]e believe there is more potential upside to Informatica's 2005 revenue estimates. Our estimates call for Informatica to post 4% year-over-year license growth, compared to 17% for Ascential. Informatica price target: 9.50.
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