For Autonomy, growth seems easy, profitability a bit less so

(By Philip Carnelley, 20 Oct 09, 09:00) As expected – see Autonomy continues to see strong trading – Autonomy has unveiled another strong set of results for its Q3. Boosted of course by last spring’s acquisition of Interwoven, revenues were up 51% to $192m for the quarter; organic growth was an impressive 15%, due in part to a long string of new client wins. Its new IDOL SPE – the application of Autonomy technology to relational data – is said to have got off to a good start with a ‘stronger than expected’ response – though no mention of orders.

Profitability growth has proven more elusive, as the company works to integrate Interwoven and launch IDOL SPE. Adjusted operating profit margins fell from 42% to 34%. The company claims that without the product launch, margins would have been 43%. But, hey, isn’t launching new products what all companies have to do? Including a fairly hefty write-down for acquisition amortisation, ‘true’ operating profit margins fell from 37% to ‘just’ 26%. Let’s be clear: these are figures many companies would kill for, but not great by Autonomy’s standards. Margins, as well as growth, support its stellar market valuation – it’s the most valuable UK software company despite being considerably smaller in revenue terms than either Sage or Misys (for more detail, watch out for our analysis of the UK software industry coming very soon!). In early trading, Autonomy’s shares have fallen 7.5%.