In the see-saw world of technology M&A, it doesn't take much to rock the boat. Soaring valuations have to be supported by something more than a unicorn fart, fresh air and a heavy dose of hype. Qlik just discovered that as its share price plunged more than 10% on reports that would be suitors have lowered their expected bid.
Prior to the current bidding situation, Bert Hochfeld on SeekingAlpha opined that activist investor Elliott had dropped something of a clanger investing $200 million in Qlik. Hochfeld's piece is interesting at multiple levels, not least what appears to have been a prescient observation that:
Elliot might be able to leap tall buildings at a single bound and achieve other feats that men of normal prowess can't contemplate. But I seriously doubt that it, or anyone else for that matter, can fix what ails Qlik. You really can't fix an egg when it ain't quite good, and Qlik ain't quite good.
I certainly can conceive of a circumstance that might involve Elliot in persuading the management to try to sell the company. And I further can imagine that there are potential buyers in the investment firmament with more money than sense as the saying goes. But another old saying is that companies are bought and not sold.
Shortly after Hochfeld's prognostication, we heard that private equity in the shape of Thoma Bravo was indeed interested. I spoke with those inside the industry that might be interested in making a strategic offer but no-one was biting. One person said they'd looked at Qlik and decided that the codebase was too much of a mess for their teams to work up into integrations that would play well for customers. I get that up to a point but then I also see other things.
At the company's annual user conference I was bemused to see the CEO devote an entire second day keynote to the company's corporate social responsibility efforts. Don't get me wrong, I have no problem with CSR initiatives but a whole keynote? From my perch it sounded like a CEO who is resigned to a certain fate deciding he's going out on his personal hobby horse. That left the CMO in terrible trouble, trying to talk up the company's achievements on the first day and then having to come back and do a sit down with an astronaut as the closer.
In between, the company showcased some great customers and those I spoke with rated Qlik highly for the way it is taking the product forward. But none of that can compensate for the almost surreal quality of an event where management was clearly struggling to get a coherent message out at a time when everyone really wants to know what's happening on the M&A front. Net-net, the good stuff was effectively lost. For example, I really like the way Qlik is working towards wooing the open source community. You can bet that short of a miracle, that will die in the hands of PE.
Almost immediately after the event and Qlik turned in some decent results, following a relatively slack period that saw its sunshine eclipsed by Tableau, which was the market darling until it got into all sorts of trouble with a less than stellar Q4 2015.
The current bidding on Qlik looks to be in the $2.8 to $3 billion range and while no-one is saying anything, I expect that Qlik's management will take that price as long as there is enough cash in the deal. Soundings I've made suggest that strategic buyers see these kinds of valuation as too high for a variety of reasons. The integration element is one factor but overarching that is the relative fuzziness of the BI market.
While Qlik would make a good play in the data discovery portion of that market some people think there just isn't enough of an addressable market for a strategic enterprise buy at current valuations. The risks are seen as too great, even though Gartner has attempted to clear up some of the hoopla by creating yet another magic quadrant for modern BI and analytics.
I have some sympathy with this view. The hype encouraging the consumption of any data has been at ridiculous levels. It has served to make it hard for decision makers to understand what to do at the best of times, let alone make sensible tool selections.
Saying that knowledge worker life is all about the data is one thing but putting that into practice on existing data is hard enough without creating the myth that any data can be ingested and made useful. That argument is not popular among so-called big data researchers and analysts keen to weave dreams around ubiquitous data consumption. But it's a whole different story when you get on the ground and start trying to figure out what people need, where the data comes from, what data to extract - the list of problems goes on.
All of which brings us back to Qlik. Assuming that the deal is closed at the current rumored price then this sets a benchmark that others may choose to follow.
Next in line will be Tableau.
None of this augers well for customers. I have a personal dislike for PE investment in most circumstances and certainly in situations where the product line is relatively simple as it is in Qlik's case. I can readily see how new management will have a wholesale clear out of non-core, dead and dying wood which will have a destabilizing impact on development and marketing in the short to medium term. That would be a great shame because whatever you want to say about the current Qlik leadership, the company still has a lot to offer on the product side.