Gartner Acquiries AMR Research for $64m

12/1/09 7:01 am PT – Initial post. Analysis to follow.

12/1/09 11:38 am PT – Analysis added

12/2/09 7:00 am PT – Free SageCircle webinar on acquisition

Replay of the webinar “SageCircle Analysis of Gartner’s acquisition of AMR Research” is now available. To receive a link and password to watch a streaming version of the webinar please email “info [at] sagecircle [dot] com”. Please include your job title and company name

Gartner’s acquisition of AMR Research for $64m, approximately 1.5x revenues, is interesting in that it does not seem to fit neatly into any one of these rationales: 

  1. Additive to expand research coverage, consulting, events and other services
  2. Acquire client base
  3. Acquire sales representatives
  4. Take out direct competition to improve pricing power
  5. Prevent competition from grabbing an asset that would be used against Gartner

First:

Approximately 75% of AMR’s enterprise clients were in manufacturing/supply chain which is not consistent with Gartner’s core CIO organization. Gartner CEO Gene Hall has doubled down on IT since taking over in 2004 and eliminated non-IT focused business such as Vision Events. So does this represent a change in strategy? Perhaps the Datamonitor-Ovum strategy of going after both business and IT leaders has caused Hall to modify his approach?

AMR is primarily focused on ERP/enterprise applications, manufacturing, supply chain, retail, and sourcing. While Gartner does have some overlap, it is very uneven from one area to another. While Gartner does have a manufacturing vertical, the number of analysts is small, only seven. Furthermore, Gartner does not have brand equity in the manufacturing space so acquiring AMR manufacturing assets makes sense. Gartner’s retail analysts number just six so combining those with AMR’s analysts also makes sense. However, AMR has lost one of its top retail analysts, Janet Sherlock, just this week. Sourcing is an area that is one of Gartner’s strengths with 40 analysts listed in that space. AMR’s sourcing research took a huge blow when Phil Fersht left in late September so that particular area might not be of interest to Gartner. ERP and supply chain are grouped together at Gartner with 27 analysts. While Gartner has a strong reputation in enterprise applications, including ERP, it has less of a brand in supply chain so combining AMR supply research would be logical.

AMR’s event business is tiny in comparison to Gartner’s with only two or three targeted events per year with approximately 500 to 700 attendees each. Even if Gartner wanted to expand into other types of enterprise clients, it would not have to buy AMR to launch these types of events.

Enhancing Gartner’s advisory/consulting assets might be a possible motivation. As published research becomes more and more commoditized, enterprise clients turn to analyst firms for personalized advice and targeted consulting. Gartner has kept its analyst team relatively constant at 650 even as it has more than doubled the sales force to 952 since late 2004 (according to Continue reading

Analyst Ecosystem News – People on the Move

Icon - newsTip o’ the hat to many tipsters who provide us with the following tips. Alas, they are all shy so they requested that their names not be used. 

Arrivals:

  • Forrester – Nigel Fenwick (Twitter, personal blog) covering CIO issues
  • Forrester – Augie “August” Ray (Twitter, personal blog) covering social computing
  • SynergyACG – Eve Griliches (Twitter) covering telecommunications equipment. Prior to SynergyACG Eve was a Director at IDC.

Departures:

SageCircle AR Podcast for November 17, 2009

SageCircle AR Podcast ArtworkThe AR podcast is a review of the latest news and trends in the analyst ecosystem along with tips and tricks for analyst relations professionals and analyst research consumers. SageCircle strategists Dave Eckert and Carter Lusher co-host this bi-weekly program. You can find all the SageCircle podcasts on our podcast page.

Visit the podcast page to download the MP3 file or listen to the episodes on your computer.  Click here to subscribe to the podcast within iTunes

SCP 13: Table of contents. Numbers in parentheses refer to minutes:seconds when the article starts within the podcast.

[00:00]  Opening

[01:02]  News (ZL Technology/Gartner lawsuit; analyst firm hiring; Twitter Directories; HENRY Corporation expands)

[07:54]  Fact Checking Magic Quadrant Leaders Inflation Accusation

[15:53]  Does it matter how much Continue reading

Is Gartner inflating the number of Leaders on Magic Quadrants?

SageCircle received an email from a reader asking whether we had seen the newsletter from a boutique analyst firm, which included a comment that Gartner has been increasing the number of Leaders on Magic Quadrants. The clear implication was that this analyst was accusing Gartner of corruption for inflating the number of Leaders in order to extract revenue from vendors in the form of analyst consulting days, research reprints, and so on. Of course, this analyst competes with Gartner for contracts and access to vendor briefings.

SageCircle has not noticed any “Leaders inflation,” but then we have not been doing any systematic, in-depth research which would be required for such an observation. We do note however that Gartner is being sued by ZL Technologies because the MQ that ZL has been listed on since 2005 still has only one (1) Leader and it’s not ZL. So I guess that Gartner gets criticized if it there are too few Leaders or too many.  The joys of being the dominate market player, everybody takes potshots at you.

The boutique analyst firm offered no proof, nor does it describe the research methodology behind the claim, so we cannot evaluate the validity of the claim.  Here are some general observations:

  1. The boutique analyst firm analysts could be looking at only a few MQs relevant to their coverage and these may have been around for a number of years. Maturing markets naturally see the vendors migrate up and to the right as the market consolidates through acquisitions or failures, vendors become better at execution, and so on
  2. The boutique analyst firm analysts do not notice that Leaders are not the only vendors who purchase reprints, vendors in all boxes – incredibly even vendors in the Niche box – acquire reprint rights and promote the MQs they are on. As a consequence, Gartner would not necessarily get incremental revenues because the Challengers and Visionaries might already be purchasing reprints of the Magic Quadrant
  3. We don’t believe there is any “Leaders inflation”

To see if the distribution of vendors around a MQ was skewed in one direction or another, we looked up a random set of MQs just to see what the breakdown was between the various boxes.  Our example set consisted of Continue reading

Gartner won dismissal of ZL lawsuit, but ZL can file an amended complaint

This dismissal by the judge hearing the case does not mean the issue has been settled as ZL Technologies can pursue other legal options.

Related SageCircle posts:

From the Research Magazine website: Round one goes to Gartner in libel battle

5 November 2009 | By Brian Tarran

Gartner has succeeded in dismissing a libel complaint brought by a software company angry at being described as a ‘niche’ player – though the vendor has been granted leave to file an amended complaint.

ZLTI v Gartner in logos

District Court Judge Jeremy Fogel agreed with the IT analyst’s argument that its Magic Quadrant reports and the positioning of ZL Technologies in the ‘niche’ quadrant constituted “non-actionable Continue reading

SageCircle AR Podcast for November 3, 2009

SageCircle AR Podcast ArtworkThe AR podcast is a review of the latest news and trends in the analyst ecosystem along with tips and tricks for analyst relations professionals and analyst research consumers. SageCircle strategists Dave Eckert and Carter Lusher co-host this bi-weekly program. You can find all the SageCircle podcasts on our podcast page.

Visit the podcast page to download the MP3 file or listen to the episodes on your computer.  Click here to subscribe to the podcast within iTunes

SCP 12: Table of contents. Numbers in parentheses refer to minutes:seconds when the article starts within the podcast.

[00:00] Opening

[00:57] News – Forrester’s and Gartner’s 3Q 2009 Earnings Announcements

[07:41] Growing enterprise client base enhances influence and relevance

[10:40] AR-Sales Case Study – Countering a negative research Continue reading

Gartner Q3 2009 earnings

This analysis does not look at areas of interest to investors, but seeks to pull out insights that are relevant to clients and prospects of the “Big Two” advisory analyst firms as well as communications and IT vendor analyst relations (AR) teams.  

logo-gartner.gifGartner, Inc. (NYSE:IT) announced its Q3 2009 earnings on October 30, 2009. See the end of this blog post for a summary and link to the press release.

In general Gartner’s results were much as expected at this point in a recession. All the key statistics were down year-over-year, but improved (i.e., less bad) quarter-to-quarter sequentially. All statistics are year-over-year and are FX neutral unless noted.

  • Overall revenues: $267.5m, down 7%.
  • Research: $187.7m, down 4%.
  • Events: $16m, down 6%.
  • Consulting: $65.7m, down 16%.

Demonstrating that a well-managed advisory analyst firm can be a cash machine, Gartner generated $55.1m in cash in Q3, only a half-million below Q3 2008. For the full year, Gartner raised its guidance on cash flow to $125m to $135m. Cash and equivalents at the end Q3 2009 was $113m, down from $141m at the end of Q3 2008. During the first nine months of 2009, Gartner primarily used cash to repay $151m in debt. Gartner retains $250m in available credit, which with the $113m in cash should give it the necessary resources to maintain its business as well as conduct M&A activity. On the M&A front, CEO Hall maintained the position that M&A opportunities are being constantly evaluated, but unlike Forrester, who mentioned it was actively evaluating potential deals, he provided no color to that remark.

Pricing

In his remarks CEO Gene Hall mentioned that Gartner’s most recent price increase was holding. Hall also said that Gartner was implementing a price increase on November 1, 2009. Yes, Gartner has been and continues to raise prices even in a recession. This can be attributed to Continue reading

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