It's easy to understand why Bernard Liautaud has a bit of a swagger these days. The chairman and chief executive of Business Objects (BOBJ) -- France's best-known software startup -- has realized his dream some 14 years after launching the company in a one-room office in a seedy Paris suburb. Last December, Business Objects sealed a $1.2 billion acquisition of rival Crystal Decisions Inc., based in Palo Alto, Calif., and shot up to No. 1 in the booming category of data-analysis software known as business intelligence. Just over a month into the life of the new Business Objects, Liautaud is still on a high. "We pioneered this industry," he crows, "and now we have created the clear market leader."
The numbers indeed look good. The combined sales of the two companies would have been $850 million last year -- about $200 million more than Ottawa-based rival Cognos Inc. (COGN). Analysts figure Business Objects, with dual headquarters in San Jose, Calif., and Levallois-Perret, a Paris suburb, can increase sales by 10% this year, to $927 million. Liautaud thinks they might -- just might -- hit the $1 billion mark. Earnings should rise fivefold, to $123 million, figures Citigroup (C) Smith Barney analyst Marc Geall. Such expectations have sent Business Objects shares up 72% in the past 12 months.
Business intelligence is hot. The big-ticket software helps companies analyze mountains of data residing on their networks -- sales figures, manufacturing statistics, financials -- and make better decisions about how to run their operations. When the tech bubble burst, the $2 billion business-intelligence sector was one of the few that kept growing as companies used the software to help cut costs.
Where does Liautaud go from here? Business intelligence is evolving into a tool that tracks activities as they happen -- or even before they happen -- instead of looking in the rearview mirror. By analyzing patterns in quality data, say, executives could catch manufacturing defects before products leave the plant. Or by scanning financial data, managers could spot unusual transactions that might signal fraud. Howard J. Dresner, an analyst with researcher Gartner Inc., cautions that such monitoring is still a few years off. But Liautaud says Business Objects is heading that way.
SCRUPULOUS PLANNING. Before he gets there, the 41-year-old CEO has to make sure the purchase of privately held Crystal Decisions goes smoothly. Crystal is the leader in software for creating management reports from data; its technology is woven into products from Microsoft Inc. (MSFT), SAP (SAP), and dozens of other companies. But the history of software mergers is riddled with failures. Liautaud and his team spent six months painstakingly planning every aspect of the marriage. And so far, Business Objects has avoided the most notorious merger problem: wholesale management defections.
There are plenty of postmerger challenges. Cognos and other competitors, such as Information Builders Inc. and MicroStrategy Inc. (MSTR), aren't folding their tents. And big software makers, such as Microsoft and SAP, are adding business-intelligence features to their product portfolios. Still, analysts believe specialized providers have a bright future. Liautaud's ambition is to build Business Objects into one of the top 15 software makers within three years -- up from No. 47 now. It's a long way from that seedy suburban office. By Andy Reinhardt in Paris