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I interviewed Applix President and CEO, Dave Mahoney, on Applix' recent acquisition by Cognos for a whopping $339 million.

Listen to or download the entire 9:32 podcast below:

Download file

A full transcript of the podcast follows Dave's biography.

About Dave Mahoney:

David Mahoney has been a director of Applix since October, 1992. Mr. Mahoney was Chief Executive Officer of Verbind, Inc., a provider of real-time behavioral analytic software and event triggering technology, which was recently sold to SAS Institute, since May, 2001. Prior to joining Verbind, Mr. Mahoney served as President and Chief Executive Officer of LeadingSide, Inc. (formerly Dataware Technologies, Incorporated), an e-business solutions provider, from January, 1999 to April, 2001. Mr. Mahoney served as President and Chief Executive Officer of Sovereign Hill Software Inc., a knowledge management software provider, from January, 1998 to December, 1998, when it merged with Dataware Technologies. Mr. Mahoney served as Chairman of the Board and Chief Executive Officer of ePresence, Inc. (formerly Banyan Systems, Inc.), a networking software company he founded, from 1983 until May, 1997. From 1973 through 1983, Mr. Mahoney was the Director of Communication Product Development at Data General.

The speakers in this podcast are Elizabeth Book (EB) and Dave Mahoney (DM.)

EB: Hi, this is Elizabeth Book, editor-in-chief of ebizQ, and welcome to another ebizQ podcast. Today, I welcome Dave Mahoney, president and CEO of Applix, a Westborough, Massachusetts-based performance management analytics company. Thank you for being with me today, Dave!

DM: My pleasure, Elizabeth.

EB: Great. So, I understand there’s been a bit of news from Applix in the last couple of days. Can you possibly tell me a little bit about what’s been going on with you? I guess we should tell our listeners that basically, Applix was acquired by Cognos in a deal valued at about 340 million. And, basically – I’d love to know a little bit about the history of Applix, and why Applix is now an attractive acquisition for Cognos.

DM: Sure, I’d be glad to give you that story, and bring you up-to-date on what’s happening here. And I think the best way to do that is to explain a little bit about where Applix has come from. The company was actually founded way back in 1983 and has been around as a player in the software, generally speaking – the software market. And has been in a number of different software businesses, as a matter of fact.

It started out developing applications for office automation on UNIX and then did some work in the real-time spreadsheet area. And then established a fairly sizeable CRM business before making an acquisition in the mid ‘90s of a company that had a product by the name of TM1, which was a unique technology. It was an in-memory multidimensional database that was designed to work on PCs and then it had been expanded to work in more powerful platforms.

Through the rest of the ‘90s, Applix as a company had a lot of variability in the business during the bubble, went searching for a longer-term business to be into. And in the early 2000’s, settled on focusing on a product area generally speaking in the analytics space, which eventually became a more focused offering in the performance management arena.

And then, in 2003 – we took a fairly dramatic step. I joined the company in 2003. The company was undergoing some fairly dramatic change at the time. And we jettisoned all aspects of other software business. We had some CRM business. We had some Linux business. And we essentially sold all of that off and refocused all of our energy on this analytic platform that the company had purchased in the mid ‘90s.

It was very interesting timing, because it gave us the opportunity to essentially clear the decks and refocus on this product and the assets that we had to work with – other than the product – was a very significant and very loyal, dedicated customer base and a group of partners who really believed that this technology was totally unique and that they believed they could do things with it that they couldn’t do with any other vendors’ technology at the time, Cognos, Hyperion and Business Objects. Microsoft. Anybody.

So that was a pretty exciting proposition, and we decided to take the cash we had and refocus the business and rebuild it and see if we could create a sizable player in the Business Intelligence market. In 2003, it was the first time the market started to talk about performance management, which is not the traditional business intelligence reporting business but is more geared towards helping finance organizations improve their overall company performance by doing more complex analytics, more operational analysis, dealing with many, many different sources of data, types of data and doing this all in increasingly real time.

And this is something that TM1 was totally unique at doing. So starting in 2003, we rebuilt the business. Hired Michael Morrison, our chief operating officer in the middle of 2004, who came in and built just a world-class field organization with a combination of very strong salespeople and some very, extremely strong pre-sales people who are very critical to our sales process.

And then we continued to build out the product and add features to it to make it more competitive. It was originally more or less just an analytic engine and then we added reporting capabilities to it, and Excel interface to make it very easily understood by the financial community. We added applications capabilities for planning and budgeting. And then we started to add consolidation capabilities. Essentially rounded the product out and went to market with that. And focused in two areas.

We were focused in selling this product to mid-market companies, where they could buy our TM1 offering and use it for everything. Reporting, planning, budgeting, forecasting, complex analytics and that’s been a good part of our growth. And then in the enterprise, where they may have been using products from Cognos or Business Objects or Hyperion, but they had an emerging need, for which their products were not adequate – either from a performance or a complexity or scalability point of view.

This is where TM1 once again had some unique characteristics. So two parts of our business, the mid-market and the enterprise, selling into customers who already had a BI platform but where the platform just wasn’t strong enough to extend into applications areas they had in mind. And that’s the way things progressed, and that’s where we’ve gotten ourselves to today. We’ve got about 220 people in the company. 3,000 customers around the world, global presence. We’re in every major market in many different verticals.

And, as a result of that focus and product-uniqueness and some good execution, we’ve been able to grow the company steadily for the last four years at rates significantly greater than any of the other competition in the space growth, in terms of revenue and license, in excess of 30-35 percent, increasing profitability and I think all of that added up to making us a very interesting and unique player in this space. And I think that’s ultimately what caused Cognos to come looking for a company that could help them execute better in this financial performance management area, and – quite frankly, we believe that we’re one of, or just about the only entity out there that they could look to at this point in time to fill that hole and, hence, I think what we would argue is a terrific evaluation.

When we started this turnaround back in 2003, the company’s market cap was about 25 million and here we are – four years later, and we sold the company for 340 million. So that’s quite an increase, almost a venture capital return over that period of time.

EB: Absolutely. It’s quite impressive. I wanted to ask one technical question, possibly – you seem to have covered a lot of the history of what Applix is all about but not necessarily what the unique offering is and what it presents for Cognos. Now, Cognos has basically been well-known for delivering analytics solutions to large enterprises, and Applix has – as you said – generally been focused on the mid-market. So can you possibly chat with us about what IT managers in large enterprises might like about your product and howthey might benefit in terms of using your performance management software?

DM: Sure! Most of the products out there, the historical, the BI products. Products that are used for historical reporting, are all disc–based products, all good products, but they are designed with the concept that people want to just read the data. And so, all the data is pre-structured, pre-calculated, stored on a disc and you can stream these reports and views of the data out very quickly. And the fundamental assumption there is that the data is going to be fairly static and not changing frequently.

Well, in today’s world, data is changing constantly. And I think IT people are finding that the financial organization, the operating people are coming back and demanding more flexibility in being able to use this valuable data. And they want to be able to play with it and do a lot of analysis and they are also acknowledging the fact that this data changes so frequently that a report that was accurate a few hours ago may be totally inaccurate now. And so they want to have an environment in this changing data can be viewed immediately in the form that it is most useful.

What our product does, is takes advantage of large memory capabilities and 64-bit technology and it’s a technology that’s written to reside the data, the models, the rules – all reside in memory. So, as data changes, rules can be used to recalculate the data instantaneously. They get the ability to change their planning model and immediately see what the result would be over a period of time. And it’s this immediate feedback that the market is demanding more of.

I think IT individuals, IT managers, executives – you know, people who are developing corporate applications are going to want to really understand the value of in-memory 64-bit environments because it can be a big part of the future. I think all major vendors are going to have to go in this direction. And now Cognos is clearly going to be in a much more leadership position than they have ever been before, with a core technology that can do things that none of the other players can do.

EB: All right. Well, thank you so much for your time today. Dave Mahoney – president and CEO of Applix, which just got acquired for 340 million, approximately, by Cognos. A very exciting company and a very exciting move for Applix, I’m sure. So, Dave, thank you so much for your time today!

DM: Thank you, very much. I much appreciate your time.

[End of Audio]

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