Enterprise search has been a steady growth market for decades now.Â The structured piece of the market has sorted itself out with Oracle being the clear technology leader and other parts of the market carved up by companies like Microsoft, IBM, MySQL and so on.
The Business Intelligence applications on top of structured data have now been mostly consolidated with Hyperion, Cognos and Business Objects all being acquired.
The ability to manage unstructured data has continued to be a key requirement inÂ the enterprise market with few, if any real new solutions emerging.Â Autonomy is by far the market leader in this category thanks to their long-time focus on the market and decisions to acquire a number of leading players, most notably Verity, over the last decade. (Endeca is a company we like in the space and that is doing very well, but they are still sub-$100M, private and more tipped towards external applications than basic enterprise search for unstructured content.)
Today Microsoft acquired FAST Search and Transfer for $1.2B.Â Earlier this week Autonomy announced a $70M multi-year deal with a large bank and renewed OEM agreements with both Oracle and EMC.Â Â
In this market the three major players are Microsoft, Oracle and Google.Â Microsoft has just made the first move with the FAST purchase.Â Autonomy is traded on the LSE and sports a $4B market capitalization on about $350M in revenues and $60M in profits (using an estimate for the TTM period ended December 31, 2007.)
The other large players, Google, IBM and Oracle can all clearly see the market opportunity but now must decide how to react after the Microsoft move.Â Most other acquisition opportunities in the space are very small and won’t move the needle much.Â So this leaves a few very large players and one remaining independent play.Â
Autonomy comes only with a large price tag because the company has done well and the float is fairly limited.Â Expectations for growth and profit are healthy but not unreasonable.Â So chances for a major pullback are small.Â
The fact remains that the vast amount of data and information available now and being created now is unstructured.Â Be it in text, video, images or numbers.Â Autonomy holds many of the keys to success in these areas and has built up a large position in the market.Â We think it will be hard for the large players in the market to resist.
— Kris Tuttle
[Author provided investment banking research services to AUTN during a public offering of stock in 1999.Â Research 2.0 owns a small equity position in AUTN.]