Are Cognos Troubles Over?
Investors were prepared for the worst when business performance management specialist Cognos (Nasdaq: COGN) reported its fiscal third-quarter earnings on Wednesday. The results, at the high end of its pre-released range, were hampered by the late release of its newest product, the Cognos 8 software suite, and by weak sales to midsize clients. But the most troubling tidbit was the 18% year-over-year decline (and a 4% sequential drop) in license revenues. Income from the Asia/Pacific region was the hardest hit, declining 12% year over year. It’s no wonder why earnings suffered as a result — they dropped 16.2% year over year and 1.6% sequentially. With enterprise software companies, license revenues are the strongest indicator of future revenues, since new licenses lead to more money coming in. They also carry the highest gross margins — typically more than 90% — so it’s no wonder why Cognos’ margins dipped slightly with the change in its revenue mix. Looking closer at the results, we
