Forrester Research: A data role player

No matter how smart a company is, most crave more data, and Forrester Research Inc. (Nasdaq:FORR) strives to fulfill their needs.

Not necessarily just reams and reams of raw data, but targeted, exclusive information put into a context pertinent to a particular business. Forrester, with headquarters in  Cambridge, Mass., seeks client companies with $1 billion in sales or more.

Forrester Research defines itself as "an independent technology and market research company that provides pragmatic and forward-thinking advice to global leaders in business and technology." Founded a quarter-century ago by chairman and CEO George Colony, Forrester has remained a leading provider of proprietary information and consultancy services. About a third of its nearly 1,000 employees are research professionals.

With a steady flow of published reports, the Forrester name is constantly visible in the news media and trade publications. The company's products and services fall under four main areas: research, data, consulting and community. Competition comes from the much-larger Gartner Inc. (NYSE:IT), and private firms IDC Research and Yankee Group.

Shares of Forrester Research have traded in a 52-week range of $20.28 seen last Nov. 19, while it hit a high of $33.64 Tuesday, before shares closed at $33.32.

Of the two analysts who cover Forrester Research, one has the stock at "market perform," with the other calling it "market outperform."

Relevance is important, and in 2007 Forrester worked on reconstituting itself as a "role player." In his letter to shareholders accompanying the 2007 annual report, Colony wrote about "Forrester's present and future" involving 17 roles, or specialty areas, of the professionals that it serves. "Our business strategy targets professionals in these 17 roles with the most relevant and valuable research, consulting, data, events, and peer networks in the world," he wrote.

RoleView is something that Colony has called Forrester's "most important" syndicated research offering. It gives clients access to a wealth of research, allowing them to freely hunt for the nuggets that could make a difference in how they do business. Syndication is important because it signals ongoing licensing revenue coming from clients. 

Launched as Oval in 2002, Forrester Leadership Boards brings interactivity to the data gathering and dissemination, for key corporate executives of its clients. The company says that the boards are its fastest-growing business, with 1,183 members at year-end and 72% growth in 2007.

The company also holds focused events for professionals, where they can gather and bump heads over their special interests.

As of March 31, Forrester Research had 2,490 client companies, a gain of 22 from the end of 2007, and its client retention rate was 76%. Forrester has said that as many as 4 million tech executives could use its role-based research, and a potential market of $9 billion. Forrester currently has about 100,000 total users.

For the quarter ended March 31, Forrester Research reported net income of $5 million, or $0.21 a share, compared with $2 million, or $0.09 a share, in the first quarter of 2007. Revenue grew 16% to $55 million from $47.3 million year over year. Research services, which accounted for almost two-thirds of revenue, increased 15% to $36 million.

The company also issued guidance for the year with its first-quarter report on April 30, calling for $240 million to $248 million in revenue, and earnings of $1.14 to $1.24 a share. For 2007, Forrester reported revenue of $212.1 million, and earnings per share of $0.80.

Last year, Forrester Research put a stock options probe behind it. Restatements were made to income statement covering 1998 through 2005, resulting in an additional $37.4 million in expenses. None of the current management was faulted in the independent investigation.

While the uncertain economy weighs on many sectors, including technology, analyst Laura Lederman of William Blair & Co. concluded in a July 8 research note that Forrester "has not been materially affected by the U.S. economy to date." After meetings, Lederman said management indicated that "technology spending remains more robust than it had expected." Blair's rating on Forrester stock is "market perform."

At Boenning & Scattergood, analyst William Sutherland seemed encouraged after Forrester management participated in investor meetings, writing in a June 18 note that he "emerged with a sense that constructive trends remain in place for the company."

Sutherland noted the company is making progress on its key growth initiatives, and shared the idea that an improving acquisition environment could encourage Forrester to seek out deals in the $20 million to $50 million range - as of March 31, Forrester had $267.5 million in cash and securities on hand. Boenning & Scattergood has Forrester rated "market outperform," with a 12-month price target of $33.

Forrester Research will report its second-quarter results on Thursday. Company guidance calls for revenue of $62 million to $64.5 million, and earnings per share between $0.26 and $0.32 - up from the year ago $55.2 million and $0.19, respectively. Investors will find out then if Forrester remains on point.

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