14 October 2003 Storage systems giant EMC today strengthened its push into the software market by acquiring Documentum, the enterprise content management software company, in a surprise $1.7 billion deal.
The move to acquire Documentum builds on EMC’s recent $1.3 billion acquisition of storage management software company Legato. Although EMC’s heritage is as a seller of big storage systems, it has increasingly been talking up its plans to move into the software sector. Now, say observers, its actions are finally beginning to follow its words.
The EMC-Documentum deal is the latest in a string of big-ticket takeovers in the fast-consolidating IT industry. EMC said its combination with Documentum would create an organisation with a “shared commitment to enabling organisations to maximise the value of their information”.
By incorporating Documentum’s content management technology with EMC’s storage platforms and software, customers will be able to better align their content with their information infrastructure, said EMC in a statement.
That combination will enable customers to implement what it calls a total information lifecycle management strategy for managing unstructured content, from creation and use to archive and disposal, the company added.
“Much of the information in today’s enterprise is unstructured data,” said EMC president and CEO Joe Tucci. “Documentum enables organisations to organise and manage their growing volumes of unstructured data by leveraging knowledge about that data.”
He added: “We believe Documentum’s rich software development talent, its management strength and depth, its top-notch sales, marketing and services expertise in content management, and its blue-chip customer base, will add significant value as EMC continues to evolve.”
The two companies have been partners since April 2002, when EMC introduced its Centera content addressed storage (CAS) product and integrated it with 65 applications including Documentum.
But despite the close relationship between the two companies the deal has still raised eyebrows in the analyst community.
“Today’s announcement comes as a surprise,” said Ovum analyst Alan Pelz-Sharpe, who had been tipping Documentum as a potential target for database giant Oracle.
He added: “EMC is a storage vendor that has no history of content or document management. It is to be hoped that Documentum will be allowed to continue largely as a subsidiary rather than simply be merged into the whole of EMC. Documentum remains a flagship vendor and its track record of benchmark activity and development will have to be handled with great care.”
FileNet, one of Documentum’s closest rivals, also poured scorn on the deal.
CEO Lee Roberts said: “EMC is paying a premium to sell storage. It has a significant integration challenge ahead of it, as Documentum is still trying to digest and assimilate some recent technology acquisitions that are part of a strategy to flesh out its product line offerings.
“The departure of Documentum as a standalone ISV [independent software vendor] is unfortunate for customers, which will have to sort through the vested interests of a hardware company in making valued software purchase decisions.”
EMC played down those fears, however. It said that Documentum, which is based in Pleasanton, California, will be run by current CEO Dave DeWalt as a Silicon Valley-based EMC software division. EMC itself is headquartered in Massachusetts.
Said DeWalt: “EMC’s significant R&D investments, leadership position in automated networked storage solutions, global distribution and service capabilities and overall financial strength will provide the scale and resources for Documentum to attain our market potential.”
The $1.7 billion that EMC is paying for Documentum represents a premium of about 28% on the content management software company’s closing share price on Monday (13 October 2003).
