Applix (NASDAQ:APLX) develops business performance management (BPM) software that helps companies analyze huge amounts of data. Wisely focusing on "midmarket" customers -- companies that fall somewhere between "small" and "huge" -- Applix increased sales a tidy 41% last year. While that growth will likely continue, it's also attracting serious competition.

Last Friday, Applix reported that its first-quarter revenue spiked 55% to $13.9 million, while license revenue rose an impressive 60% to $7.11 million. That growth should ultimately boost maintenance and service revenues. In another healthy sign, average contract size increased from $55,000-$60,000 to $60,000-$65,000.

Net income increased sevenfold to $759,000, or $0.04 per share. So far this year, the company has added $5.9 million to its cash balance of $33.1 million.

Applix's revenue guidance for 2007 calls for growth of 28% to 35%, which translates to between $67 million and $70 million.

In light of the company's recent growth trends, those estimates look like an understatement. Keep in mind that last year, Applix ramped up its spending on sales, marketing, and lead generation. It should start to see the benefits of these investments over the next couple of quarters.

Competitors certainly want a piece of the action. Cognos (NASDAQ:COGN) is moving into the midmarket -- that area between huge and small companies -- as is Microsoft (NASDAQ:MSFT).

There are also key M&A deals unfolding in the BPM space. Oracle (NASDAQ:ORCL) recently spent $3.3 billion to acquire Hyperion, and Business Objects (NASDAQ:BOBJ) bought Cartesis for $300 million.

It will take some time for the competition to make its mark, but it seems inevitable. Still, the aggressive M&A from top players is certainly a validation of BPM, and it looks like Applix's growth should remain strong throughout 2007. It's a nice combination for now, and Foolish investors should definitely take note.

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Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. He is currently ranked 2,142 out of 28,200 in CAPS. Microsoft is an Inside Value pick. The Fool has a disclosure policy.