Hyperion Solutions Corporation

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Hyperion Solutions Corporation

5450 Great America Parkway
Santa Clara, California 95054
U.S.A.
Telephone: (408) 744-9500
Toll Free: (800) 286-8000
Fax: (408) 588-8500
Web Site: http://www.hyperion.com

Public Company
Incorporated: 1991
Employees: 2,500
Sales: $702.6 million (2005)
Stock Exchanges: NASDAQ
Ticker Symbol: HYSL
NAIC: 511210 Software Publishers

Headquartered in Santa Clara, California, Hyperion Solutions Corporation is a leading developer of business performance management software, which helps businesses to gather, organize, and analyze business data; determine corporate performance; and then improve that performance through the use of modeling and planning. According to the company, it is the only industry player to offer business intelligence and financial management applications in one system. Through a network of approximately 600 partners, Hyperion serves a base of some 10,000 customers in 45 countries worldwide. These include the likes of Allstate Insurance, Braun, Coca-Cola, FIAT, H & R Block, Hyatt, Novartis, Staples, Toyota Motor Sales USA, and Yale University.

Establishment and Growth: The 1980s

Hyperion Solution Corporation's roots stretch back to 1981, when Marco Arese and Bob Thompson established International Management Reporting Services Inc. (IMRS). During its early years, the company was based at 1033 Washington Boulevard in Stamford, Connecticut. According to Hyperion, the release of IMRS's flagship product, Micro Control, "defined a new market by delivering multinational financial reporting on personal computers."

A native of Milan, Italy, Arese made a sizable start-up investment in Hyperion and played a central role in developing the company's international operations. Prior to starting Hyperion, Arese earned an M.B.A. from the University of California at Berkeley and worked for Citibank in Milan and London, where he designed financial reporting software. He then established a software company called Fienco SpA, which focused on PC-based treasury management systems.

Cofounder Thomson served as Hyperion's president and CEO, ultimately retiring from the company's board in August 1998. Before his role at Hyperion, Thomson worked in the management and technical ranks for Citicorp, Citibank, Rank Xerox, and Dolby System Labs. After leaving Hyperion, he relocated to Bermuda and became a "business angel" on the U.S. East Coast and in Scotland.

In addition to Micro Control, IMRS's early products included a data collection application called FinalForm, which companies used to automate and consolidate the collection of data from remote locations. With a license price of $40,000, FinalForm helped companies to streamline their financial operations and improve the efficiency of inventory management, sales reporting, and tax recording and preparation.

IMRS ended the 1980s by acquiring New York-based Corporate Class Software Inc., a subsidiary of Bridgewater, New Jersey-based Hoechst Celanese that produced a complementary line of management reporting software called FASTAR (Financial Application Solution to Analysis and Reporting). At the time of the acquisition, Micro Control and FASTAR were the leading software applications in their category, used by the likes of Unilever USA, Warner Communications Inc., and McDonald's Corporation. Each application cost about $75,000. The acquisition pushed IMRS's sales to $20 million and saw the consolidation of development, sales, and support. At this time James Perakis served as IMRS's president and the company had about 400 corporate customers and some 5,000 installations.

In 1989 IMRS also released a new Windows-based financial reporting application called OnTrack, which was instrumental in that it allowed novice users to generate corporate and financial reports by using a mouse and clicking on hypertext links. Compatible with Micro Control, the new program was priced at $35,000. IMRS ended its 1989 fiscal year with sales of $12 million.

Market Leader: The 1990s

By the early 1990s IMRS was growing at a healthy clip. In fact, the company had been recognized for four consecutive years as one of the fastest growing private companies in the United States by Inc. magazine. After subleasing an additional 9,200 square feet at its 1600 Summer Street Stamford location in 1990, the company moved forward with a major relocation, subleasing 73,558 square feet of space in Stamford's Long Ridge Office Park. The new facility, located at 777 Long Ridge Road, allowed IMRS to consolidate its headquarters with the company's Washington Boulevard location, which was being used for training. By this time, the company had grown to include a staff of 280 employees.

IMRS continued its expansion efforts by opening three new regional offices in 1991. Devoted to sales and support, the new sites included a Canadian office in Calgary, as well as locations in St. Louis and Philadelphia. With a total of 15 offices worldwide, including 11 in the United States, the company's revenues reached $34 million in 1991, up from $24 million in 1990. IMRS ended the year by going public. The company completed its initial public offering on October 25, raising approximately $40 million that it planned to use for debt reduction and future expansion.

By this time IMRS had added an application called Treasury Control to its product lineup and had named its flagship software, which held 85 percent of the financial-consolidation software market, Hyperion. With the launch of its Hyperion Financials line, IMRS set its sites on the client-server financial reporting software market in early 1995. Unlike its main market, the client-server sector was home to a number of established competitors, including Lawson Software, Platinum Software, and PeopleSoff. At this time, IMRS changed its name to Hyperion Software Corporation.

In 1998 Hyperion was acquired by Arbor Software Corporation. The newly merged firms adopted the name Hyperion Solutions Corporation. Arbor was established in 1991 by Bob Earle and Jim Dorian, two pioneers in the field of business analysis software. Prior to the acquisition, the company had unveiled its flagship online analytical processing (OLAP) software in 1992, generating sales of $1.1 million. By 1995 Arbor had gone public and was listed on the NASDAQ. In 1997 Arbor made its first acquisition when it purchased Orlando, Florida-based Appsource, which had developed an OLAP presentation and viewer tool.

With an estimated value of $780 million to $1.3 billion, the merger resulted in the company relocating its headquarters to Sunnyvale, California. Jim Perakis was named chairman of the new enterprise, and Arbor Chairman and CEO John Dillon was named CEO. Stock ownership was divided so that Arbor investors held a 40 percent stake in the company and Hyperion shareholders held a 60 percent share.

Following the merger, Hyperion Solutions had about 1,800 employees in 26 countries who served a customer base of some 4,000 organizations in 40 countries. Its clients, which included Adobe Systems, Allergan, and Kraft Foods, hailed from a variety of industries, including consumer goods and services, healthcare, information technology, education, insurance, telecommunications, government, banking, transportation, and retail.

Hyperion proceeded to integrate its products and sales forces following the merger. As of late 1998 the company offered four main products to its customers. These included a presentation and reporting tools set called Hyperion Tools; an OLAP server called Essbase; the Hyperion Enterprise tool for financial consolidation and reporting; and a budgeting analytic program called Hyperion Pillar.

In early 1999 the research firm International Data Corp. issued a report citing Hyperion as the market leader in analytic applications, with a share of 18 percent. The report also placed Hyperion at the head of the market for financial-related analytic applications, with a share of 36 percent. Around this time Hyperion spun off its decision support arm as Appsource Corp., the name it had operated under before Arbor purchased the company in December 1997.

While the Hyperion-Arbor merger created the industry's largest business intelligence software enterprise, wide-ranging integration issues followed. This especially was the case with the company's sales force, in that teams that once competed against one another (and downplayed the other side's products) were now in a position to promote the offerings of both companies.

By mid-1999 Hyperion had experienced a sequential drop in quarterly revenue, as well as a decline in its stock price. A number of executives resigned, and Hyperion fired CEO John Dillon and Vice-President of Worldwide Sales William Binch, citing "problems with their 'expectation management and forecasting,'" according to the May 4, 1999, issue of Computergram International.

Company Perspectives:

Hyperion Solutions Corporation is the global leader in Business Performance Management software. With Hyperion you can collect, organize and analyze data—then distribute it throughout your enterprise using a rich, unified workspace that makes business performance management easier and more powerful than ever before. Hyperion solutions can help you drive performance improvements by better aligning goals with metrics, increasing your operational efficiency and becoming more comfortable with the integrity of your numbers.

In its May 10, 1999 issue, Computergram International noted that "the company's inability to successfully execute a post-merger strategy appears to have caused a level of dissension within virtually every aspect of the organization. The conservative Hyperion failed, and is still failing, to gel with the more dynamic and performance-oriented Arbor. And one year on since the deal was first announced the combined Hyperion Solutions looks in only slightly better shape than when the operation was being run as two separate organizations."

After Dillon was fired, CFO Steve Imbler was named interim CEO. He ultimately was replaced by Jeffrey R. Rodek, who assumed the role of both chairman and CEO. Prior to joining Hyperion, Rodek was president and worldwide chief operating officer of Ingram Micro Inc., a Hyperion board member, and also a 16-year executive with Federal Express.

Moving past its operational troubles, in 1999 Hyperion acquired Sapling Corporation, a developer of enterprise performance management software, for $15.5 million. The acquisition helped Hyperion to stave off competition from SAP AG and Oracle Corporation. Hyperion renamed Sapling's main products and added Hyperion Performance Scorecard and Hyperion Business Modeling to its product lineup. Hyperion ended the 1990s with fiscal year 1999 sales of $424.9 million. In addition, for the second consecutive year Deloitte & Touche and Joint Venture: Silicon Valley Network named the company to the 1999 Silicon Valley Technology "Fast 50" for being one of the valley's fastest growing technology firms.

Web/Enterprise Focus: The 2000s

Hyperion began the new millennium by introducing Hyperion Planning and Hyperion Financial Management, two Web-based packaged financial applications. In 2000 the company also partnered with WebTrends Corporation to provide its customers with integrated e-business analysis solutions. This was accomplished by integrating Hyperion business analysis applications with WebTrends' Commerce Trends solution.

Hyperion also joined the XBRL Project Committee, a coalition of some 30 software, government, and accounting firms that was formed to promote extensible Business Reporting Language as a free, open standard for financial reporting. According to an April 6, 2000, Business Wire release, XBRL sought "to help organizations easily distribute financial information in any format, including HTML documents for the Web, printed financial statements, EDGAR filing documents for the Securities and Exchange Commission (SEC), or other specialized reporting formats such as credit reports or loan documents." These developments came at a time when users were demanding sophisticated Web-based tools.

In addition to competition from industry heavyweights like Microsoft, Hyperion was challenged by stagnant revenues and declining economic conditions. In response, the company tightened its belt to weather the storm. This resulted in a 15 percent workforce reduction (400 jobs), a hiring freeze, travel restrictions, and cutbacks in capital spending. In addition, Hyperion indicated that it would focus its workforce around its profitable products. One analyst noted that the company had created confusion in the marketplace—and within its own sales force—by introducing too many products, and that Hyperion would do well to eliminate resource-draining, underperforming products.

Hyperion ended its 2001 fiscal year with sales of $528 million, compared with $492 million in 2000. It reported a net loss of $31.1 million, however, compared with net income of $30.6 million in fiscal 2000. On a positive note, the company returned to profitability during the fourth quarter, reporting net income of $1.8 million despite a tough economic climate.

Following similar developments by competitors like SAP AG, Oracle Corporation, and PeopleSoft Inc., in September 2001 Hyperion announced that it would make its business intelligence and data warehousing products available enterprisewide by 2004. This move would give executives a broader top-level view and make it easier for departments and business units to share information. In October, Godfrey Sullivan was named as Hyperion's president and COO; Jeffrey Rodek remained chairman and CEO. Prior to joining Hyperion, Sullivan served as CEO of marketing software developer Promptu Corporation.

In 2002 Hyperion saw its revenues fall to $492 million. The company was profitable for the year, however, with net income of $15.7 million. Hyperion received a license revenue boost during the fourth quarter when it gained 235 new customers who contributed 44 percent of license revenue. Among the new customers were Citigroup, Motorola, and Northrop Grumman. Attributing to Hyperion's success was the introduction of new products, including its Hyperion Business Performance Management Suite.

Heading into 2003, Hyperion was on solid footing. As accounting scandals at companies like Enron ushered in new accountability standards for the corporate sector, the company stood to benefit by increased sales of its reporting software. In a January 24, 2003 interview with the America's Intelligence Wire, CEO Jeffrey Rodek noted a 13 percent year-over-year increase in Hyperion's software business and remarked that the company's balance sheet was "the strongest ever."

Key Dates:

1981:: Marco Arese and Bob Thompson establish International Management Reporting Services Inc. (IMRS) in Stamford, Connecticut.
1982:: IMRS releases its flagship financial reporting product, Micro Control.
1989:: Following the acquisition of New York-based Corporate Class Software Inc., sales reach $20 million and corporate customers number 400.
1990s:: Early in the decade, IMRS is recognized for four consecutive years as one of the fastest growing private companies in America by Inc. magazine.
1991:: IMRS goes public.
1995:: IMRS changes its name to Hyperion Software Corporation.
1998:: Hyperion is acquired by Arbor Software Corporation; the merged firms adopt the name Hyperion Solutions Corporation and establish headquarters in Sunnyvale, California.
2001:: Hyperion cuts 400 jobs and implements other cost-saving measures.
2003:: The company acquires The Alcar Group and Brio Software Inc.
2005:: Information Age dubs Hyperion Essbase as "one of the 10 most influential technology innovations of the last 10 years."

Hyperion's business performance management line was bolstered significantly with the April 2003 acquisition of Skokie, Illinois-based The Alcar Group, a developer of financial model-ing software, followed by the $142 million acquisition of Santa Clara, California-based Brio Software Inc. By October Hyperion was working to integrate Brio's products into its own lineup, giving Hyperion the ability to offer business intelligence software; Hyperion's Business Intelligence Platform was released in 2004.

A number of important developments occurred in 2004. In response to more stringent corporate governance standards, the company split the role of chairman and CEO. Jeffrey Rodek became executive chairman, and Godfrey Sullivan assumed the role of president and CEO. The company also unveiled Hyperion Essbase 7X, calling it "the most dramatic innovation in analytics since the company pioneered OLAP technology in 1992."

In August, Hyperion cut 50 jobs as it moved more software development offshore. According to an August 18, 2004, Knight Ridder/Tribune Business News article, the move was upsetting to workers, some of whom had just completed a questionnaire for Fortune magazine's "100 Best Companies to Work For" list only days before. Despite strong financial performance, the company insisted the move was necessary for it to remain competitive. Hyperion CEO Godfrey Sullivan ended the year by announcing that the company had set aside $1 million to offer employees $5,000 toward the purchase of environmentally friendly cars (those with fuel economy of at least 45 miles per gallon).

Hyperion started 2005 on a sour note as it was sued by two other companies for patent infringement. The first suit was filed by HyperRoll Israel Ltd., claiming that the Hyperion Essbase 7X OLAP server infringed on two of its patents. Stamford, Connecticut-based OutlookSoft Corp. also filed two infringement suits against Hyperion related to patents for its Everest application.

In early 2005 Hyperion acquired Razza Solutions Inc., which bolstered its capabilities in the area of business performance management software. The company ended fiscal year 2005 with record revenues of $702.6 million, up 13 percent from $622.2 million in 2004. Hyperion's net income spiked 52 percent, reaching $66.7 million.

Hyperion continued to release new business performance management products in 2005. The company's Hyperion System 9 offered users one system with a business intelligence platform and financial management applications.

A major highpoint in the company's history also occurred in 2005 when Information Age dubbed Hyperion Essbase as "one of the 10 most influential technology innovations of the last 10 years," according to an August 16, 2005, M2 Presswire release. In the publication's 10th anniversary issue, Information Age editor Kenny MacIver remarked: "Hyperion Essbase was the multi-dimensional database that put online analytical processing on the business intelligence map. It has spurred the creation of scores of rival OLAP products."