ICT and Internet Business is an Independent Blog Focusing on ICT and Internet Business, eBusiness, Digital Media, Online Advertising, Internet Marketing, Mobile and Wireless, etc.

Autonomy Wakes Up to Content Management

  • Posted: Tuesday, February 03, 2009
  • |
  • Author: pradhana
  • |
  • Filed under: Business Analysis

By Madan Sheina, principal analyst at Ovum

On the heels of another sterling quarter, UK-based Autonomy announced that it is prepared to splash out $775 million to buy US content management (CM) firm Interwoven. This deal, which goes against the grain for the software industry as it’s normally US companies that buy their European counterparts, will boost Autonomy’s North American presence, offer cross-selling opportunities into a growing compliance market and could also spark off more consolidation this year.

Interwoven isn’t cheap, but recent form justifies the price tag
This all-cash deal, which is expected to close in the second quarter of 2009, is hardly a bargain. Autonomy is paying $16.20 per share, a 37% premium over its closing price of $11.84 the day before the deal was announced. But that’s partly because Interwoven has been trading well recently – the company expects revenues to grow 10% in its fourth quarter.

The move comes at a financially bullish time for Autonomy, which saw its fourth quarter net profits more than double. That explains why at a time of global credit crunch Autonomy was able to secure a new revolving $200 million credit facility from Barclays that helped to fund the deal. And since Autonomy is a highly cash generative business it’s natural that it puts that money to work – in the same way that it bought Verity for $500 million back in 2005. For Interwoven this price is just reward for a profitable turnaround of fortunes and its recent efforts to refocus its business on e-discovery through its Discovery Mining acquisition.

Deal puts IDOL’s capabilities into sharper business focus
Autonomy is as much drawn to Interwoven’s strengths in the legal and compliance sector as it is to its CM technology. It’s an area that Autonomy has been focusing on, now offering products aimed at compliance with legal and regulatory obligations that are built on its IDOL (Intelligent Data Operating Layer) server.

Autonomy clearly feels a need to sharpen the business relevance of its technology platform – a historic problem for the company that stems from the broad positioning of IDOL as a generic ‘e-discovery’ platform. Interwoven sharpens the focus on the regulated legal and compliance environment.

Since Autonomy’s software helps companies to keep a handle on growing mountains of documents, emails, presentations, phone calls, voice mails, videos, etc, it is well suited for this. In addition, many US companies are now coming under increased pressure and scrutiny through toughening regulatory compliance burdens that force companies to manage their data assets in a more disciplined way.

Cross-selling opportunities are up for grabs
Autonomy will be keen to scale cross-selling opportunities for its IDOL technology into Interwoven’s 4,600-strong client base – which includes over 70% of the top law firms in the world.

Interwoven content management customers will benefit through a better understanding of the meaning (i.e. business context) of content stored in their repositories. However, there is some serious integration work to do first in order to leverage IDOL’s auto-tagging capabilities to the content management process.

Fortunately Autonomy does have a good track record in integration through the work it did on the ZANTAZ and Meridio product lines. There are also opportunities to leverage IDOL in the 100,000-odd websites and corporate intranets that Interwoven’s software manages, as well as to combine it with Autonomy’s Etalk customer interaction software and Digital Safe solutions.

Expect more consolidation in the content management
Autonomy’s acquisition of Interwoven whittles away the number of potential takeover targets in this sector and might well spark off a fresh wave of consolidation activity. SAP and Open Text are the most likely movers and shakers, while Vignette is the company most likely to come under the acquisition spotlight.

Indeed, Autonomy’s swoop might well pave the way for a graceful exit for Open Text, which seems to be a natural target for SAP – even though SAP has also invested in CM firms Alfresco (open source) and India’s Newgen. SAP and Open Text have been close partners for years, and SAP is believed to be on the lookout for a CM capability to rival acquisition moves by Oracle (which acquired Stellent) and IBM (which bought FileNet). /PR

0 people have left comments

Commentors on this Post-