Search No Further: Autonomy Looks a Great Investment ; THE INVESTMENT COLUMN
Our view: Buy
Share price: 426p (+17.25p)
It has taken some time but Autonomy, the internet infrastructure software company, has finally started to motor.
Autonomy was one of the high-profile UK tech bubble stocks - one of those companies that investors poured money into without really understanding what its technology did or why it was important. During the grim years that followed, Autonomy investors fed off interest made from cash in the bank. Many assumed that the Cambridge- based company would fall victim to Google's rampant march across the internet search sector as other dot.com era stocks crashed to earth.
Yet Autonomy operates in a different market to Google and its context-based search technology has steadily won more customers. It sells to governments, corporates and other organisations, enabling them to search a variety of media, from voice to video, for any topic under the sun.
The acquisition of its key rival Verity last year propelled the company into a position of clear market leadership.
While Autonomy now has 16,000 customers, its nearest competitor Fast Search has 3,500.
Meanwhile, customers have caught up with the need to use the vast swathes of dormant data trapped in their servers and data centres for a variety of reasons. Governments can use that information to track terrorists while corporate customers can search for product problems or customer trends.
In a brief statement, Autonomy has lifted the curtain on second- quarter results that will beat market expectations. Revenue will exceed a forecast range of between $55m and $60m while adjusted profit before tax, which strips out share options and goodwill amortisation, will be higher than the $15.1m average market forecast.
The results will be reported in full on 26 July but are comfortably ahead of that reported in the seasonaly strong first quarter when revenue was $56.1m and adjusted pre-tax profit $10.3m.
The second-quarter performance means that Autonomy has reported six consecutive quarters of record results, enough to impress even the most hardened technology cynic.
The company benefits from an operational model that means costs are kept very low. That means revenue growth feeds straight through to the bottom line.
With a customer base that stretches from Ford to the US Homeland Security department, Autonomy's progress looks set to continue. The company has also invested in broadening the applications of its search product outside corporate and government data trawling. …