As predicted in a post 2 weeks ago, there has been an announcement of consolidation in the Business Intelligence (BI) field. Today’s announcement of IBM’s (NYSE:IBM) purchase of the Swedish company Telelogic for $745 million, is evidence of continuing M&A momentum in the BI space.
BI systems help companies achieve a more in-depth understanding of factors within its business, such as metrics on sales, production, and internal operations, all which help companies in making more well-informed decisions.
It’s important to note that investing in BI companies is not about trying to pick the next takeover target, but rather, it’s a play on the strong growth the industry is in the midst of.
One of the companies I mentioned as a takeover target is the Israeli company, Retalix (NASDAQ:RTLX). Retalix automates and synchronizes retail, distribution, and supply chain operations for stores, headquarters, and warehouses. It has been rumored to be a buy-out target by either SAP (NYSE:SAP) or Oracle (NYSE:ORCL) for some time. Today it announced a deal with China’s HomeBuy Houseware, one of China’s largest and fastest growing do-it-yourself and home furnishing retailers.
“The on-line synchronization between Retalix’s point-of-sale solution and the headquaters, loyalty and promotions management system, enables us to respond faster to customers’ expectations and thus improve customer retention and satisfaction levels,” said Lorence Ye, Operations Director of HomeBuy.
It is important to note that this is needed to improve customer service. It’s clear that this solution is more and more in demand, giving credibility to the theory that this may be the fastest growing space in software. As for Retalix, this is a huge win, because it has successfully penetrated the traditionally hard-to-penetrate Chinese market. “Our partnership with HomeBuy is an important step in the implementation of our strategy to expand our business in China,” said Barry Shaked, president and CEO of Retalix.
Regardless of whether Retalix gets taken over, it’s an intriguing investment in a rapidly growing space.
Disclosure: The author’s fund is long RTLX as of June 11, 2007. He does not hold positions in the other companies listed.
RTLX 1-yr chart