When a local paper starts to speculate on acquisitions, I’ve learned to take notice. You see those of us in the industry have our contacts usually with either an NDA or FrieNDA in place. But papers have theirs sources, some friend of a friend to a journalist.
So the article over the weekend caught my attention. Was this some journalist with a hot tip trying to make his mark or a piece to beef up the Saturday business section? I read the article from the Waterloo Record hoping to discover a tip but discovering it was more filler. But it did bring up an interesting candidate, though the author didn’t see it himself. So while Lee looked at where Open Text was today, I thought I’d look at where they might go. I loved to see the quote, “Representatives of … said their company doesn’t comment on acquisition speculations.” But we can speculate. So let me look at the two motioned in the article and one that I can’t believe that wasn’t.
Microsoft
When a story leads with Microsoft, I think it’s really trying to get the search engine’s attention (especially when it’s used thirteen times in the article). And you can always find an analyst to say it’s a safe bet to say that Microsoft would be interested in any tech company. I commented before that Open Text’s latest positioning is a wink at Microsoft, but would Microsoft wink back? If we look at Documentum and FileNet being bought for $1.7 and $1.6, an Open Text acquisition would be in the exclusive list of Microsoft’s billion dollar acquisitions; Fast Search & Transfer, aQuantive, Navisio, Great Plains, and Visio. But Microsoft likes to improve on technology with their acquisitions. Also SharePoint is doing too well in the market I think for them to even think about OpenText. Besides Yahoo, at $50b, would be the largest deal since aQuantive, a marketing firm at $6b, and that would keep them busy for some time.
Open Text, I think Microsoft … NOT!
SAP
Since I decided to count, SAP was mentioned nine times in the article. There is already a strong relationship between SAP and Open Text through the IXOS products. While everyone tries, IXOS seems to be the only ECM solution to have a successful integration with SAP. But right now Open Text is a mash of ECM platforms; Open Text, IXOS, Artesia, RedDot. Also their industry focus is a little off for SAP, with the focus on legal. But I think more important is the US Economy.
In February I mentioned one dollar would by €0.70 (Euros), today it buys €0.65. This would mean that SAP could buy a US ECM vendor at a serious discount. Ones that jump to mind might be Interwoven or Vignette. My thinking is that if SAP is looking, then it’s at Hyland Software. Hyland already has an integration to SAP and is set in the “Challenger” quadrant in Gartner’s Magic Quadrant for Enterprise Content Management 2007. The $266m investment/ acquisition from VC firm Thoma Cressey Bravo last year, I think makes an attractive price for a European software company to consider. But this is about Open Text.
Open Text, don’t pin your hopes on SAP.
Google
So, I read the lead in sentence in the article and my mind started churning but by the third paragraph I see the article missed it. Open Text and Google? Things that make you go hmm.
We all know that Microsoft’s challenging Google by going after Yahoo. Microsoft has somewhere around $19B in cash and Google somewhere around $15B (in case your wondering Yahoo has $2B). While a Microsoft acquisition of Yahoo would cause indigestion reminiscent of a Nathan’s Hot Dog Eating Contest, a Google acquisition of Open Text would barely be an amuse bouche (sorry been watch Top Chef). We all know Google’s dabbling in ECM or more appropriately collaboration. But if Microsoft makes the move then Google will need a response. Why not Open Text?
Open Text has had a healthy position in the ECM for sometime. Though they may have lost some of our attention here recently, they’re the only ones in the leader quadrant to remain a solo act. An influx of cash could be what they need. With cash the questions of market viability goes away and the product again stands on its own again against IBM, EMC, and Oracle. In return for Google’s cash, they get a wide foothold in the enterprise that they can use to enhance Google Enterprise beyond the search appliance. Add to this there’s ZERO overlap with what Google does today.
Open Text and Google, eh? Think about it.
So When
Speculation around an Open Text acquisition have been out there for a while. It was the question being asked in 2003 when Documentum was acquired and again in 2006 when FileNet and Stellent were acquired. There’s a chance that Open Text could make it on their own, but they could slowly loose market share. Still you have to give respect to a company that’s been able to hold its position this long with all the changes going on around them.
I wish I could believe that they were doing well because of their technical innovation and marketing. In truth, I believe in recent years they have derived more benefit from consolidation backlash. A significant portion of their growth has also been from key acquisitions, some with unfortunately overlapping product sets.
Google and OpenText? I don’t think so. There is zero overlap because Google is not the least bit interested in gaining corporate market share through installed business applications. Not so far anyway.
The notable exception is the search appliance. Here’s a thought – embed a CMS with the Search Appliance then you might have a case for an acquisition but the OpentText footprint and portfolio of applications make it a poor choice. Alfresco would be a much better choice.
I think SAP is the leading software contender. OpenText seems to be acquiring ECM systems in the hopes that they land the one a big company wants.
How about a hardware vendor? HP? NetApps? Who would have identified EMC as a buyer for Documentum?
One last note, OpenText acquired Hummingbird who acquired PCDoc/Fulcrum before it, where I got my start in this whole ECM thing
I can’t believe that people don’t see the strengths of a small company like Open Text being able to play in the big leagues and remain competitive.
I really don’t see consolidation backlash. Are you saying that companies would skip going to something that been acquired by a large stable company to go with a smaller company just because they’re upset about the acquisition? I seriously doubt it. And by the way the only real consolidation was IBM acquiring FileNet. There was no existing CM product of merit at either EMC or Oracle so those were just address changes.
Only Open Text has been the one to do any real consolidation with Hummingbird, Artesia, and RedDot. Usually this type of consolidation has brought uncertainty due to the number of repositories but Open Text seems to be doing well around this.
As to Google and Open Text in the enterprise there have been rumblings (here, here, and voice here). I agree with PIE, seriously how many people “outside” saw EMC acquiring Documentum. Companies do enter new markets with acquisitions. It’s not hard to image that the folks at Google saw what’s happened to Yahoo as it started to loose the search engine war. What are the chances that we’ll be using Google in ten years? Google needs to add something to the repertoire and they know it.
As for SUN, they have $3.5B cash. They’ll be the ones picking up Alfresco, probably before the end of summer. Alfresco’s open source JAVA model fits very well with SUN. I wouldn’t be surprised if SUN tries to make a move soon especially as the market pushes either Alfresco or Sugar CRM to IPO. Sun will want to make a move before market evaluation pushes the price to high.
HP as a possible candidate, I don’t necessarily see that happening. HP has yet to be successful in acquiring software and aren’t doing to well themselves. I think they have to much change going on to enter this market. Though they do need something to get on parity with IBM. Then again they could simply be satisfied with the desktop and workgroup servers.
NetApp is interesting. It would add to their ECM capabilibies beyond Virtual File Manager. They could be watching what EMC is doing and this progress there I’m sure fits into their acquisition strategy. Though it also does seem that their acquistion strategy to date has been focused on the end of data and content lifecycles.
Seems a Wall Street Journal blogger is now agreeing with me. Five Companies Google Might Buy Next.