Roth Upgrades Informatica to Buy Post-IBM/SPSS Deal

IBM’s (IBM) announced acquisition of SPSS (SPSS) this morning could prompt a wave of acquisitions in enterprise software, writes Roth Capital analyst Nathan Schneiderman today. The primary targets include Actuate Software (ACTU), Informatica (INFA), Microstrategy (MSTR), Netezza (NZ), Teradata (TDC), believes Schneiderman.

“We expect that the BI-analytics space will continue to consolidate and envision

Hewlett-Packard (HPQ), IBM, Oracle (ORCL), and SAP AG (SAP) as the likely buyers. In our view, today’s news bodes well for valuations across the sector, and we expect some rally in sympathy with the news.”

Schneiderman concludes from today’s SPSS deal that valuation multiples for acquisitions are at 2.6 times revenue, 14 times free cash flow, and 21 times earnings. He expects SPSS will not receive a competing bid.

Based on the premise of acquisition, Schneiderman raised his rating on shares of Informatica from “Hold” to “Buy” and raised his price target to $21 from $19.

Informatica shares today are up 45 cents, or 2.5%, to $18.32. Netezza is up 30 cents, or 3.5%, at $9, and Actuate, which last night beat Q2 estimates, is up 42 cents, or 9%, at $5.