UPDATE 3-Cognos to buy software maker Applix for $339 mln

(Adds analyst comments, updates stocks. In U.S. dollars)

By Susan Taylor

OTTAWA, Sept 5 (Reuters) - Cognos Inc. CSN.TO COGN.O, Canada's biggest software company, said on Wednesday it plans to buy U.S.-based Applix Inc. APLX.O for $339 million in cash to gain a bigger piece of the financial performance management market.

Cognos, which makes software that helps companies sift through data to find trends, said the offer of $17.87 per share is worth $306 million, excluding Applix's cash on hand.

It is a 24 percent premium to the closing price of Applix stock on Tuesday, causing some analysts to ask if the purchase of the analytics software maker is too pricey.

After the deal was announced, Applix stock rose 22 percent to $17.55, while Cognos shares dipped 1.5 percent to $40.47.

"Financial performance management is fundamental and foundational to what we do," Cognos Chief Executive Rob Ashe told Reuters in an interview.

"We expanded into financial performance management probably about 6 years ago, as part of our strategy at the time to go from business intelligence -- where we manage performance in operations -- to financial performance management -- where we manage performance in finance."

The global market for business management and financial analysis software is estimated at $8 billion to $10 billion annually, with growth in the low-teen percentage basis, Ashe said.

The Applix acquisition will be dilutive to fiscal 2008 and 2009 net earnings on a GAAP basis, Cognos said on a conference call.

Excluding the effect of stock-based compensation, amortization of intangible assets and the write down of deferred revenue, the deal will be "very slightly" dilutive in the second-half of fiscal 2008 and add to earnings "slightly" in 2009.

Applix posted trailing 12-month revenue of $61.2 million and year-over-year growth of 45 percent.

BMO analyst David Wright said the deal advances Cognos's push into performance management, but he cut his rating to "market perform" from "outperform".

"The 5 times revenue sticker price causes us to pause and reflect on the risks of integration and productivity," he wrote.

Blackmont Capital analyst Lawrence Rhee noted that Applix sales last year represent 6 percent of Cognos revenue. "Expensive acquisition ... for what appears to be an upgrade to its existing Powerplay and analytics offerings," he wrote.

Ottawa-based Cognos expects the purchase of Westborough, Massachusetts-based Applix, among its biggest takeover deals, to close in the fourth quarter of 2007.

"We've had a steady pace of acquisitions and we continue to have an appetite to acquire," Ashe said.

UBS analyst Heather Bellini said the deal will make Cognos more competitive against financial performance management leader Oracle, which announced a $3.3 billion deal to buy Hyperion Solutions in March.

(Additional reporting by Scott Anderson in Toronto)

($1=$1.05 Canadian)