OpenText Acquires HP CX Content Management for $170M
OpenText Corporation, a global leader in Enterprise Content Management, announced it has signed a deal to acquire certain customer experience software and services assets from HP Inc for $170-million (U.S.) in cash.
OpenText, whose CEO is Mark Barrenechea, anticipates the assets to generate between $85 million and $95 million in the first year. That means the Waterloo, Ontario-based company can expect to break-even on its HP acquisition in only two years. It seems that the acquisition cost of $170 million is a bargain, especially when it is compared to EQT’s recent acquisition of a majority stake in Sitecore for $1.14 billion. When Interwoven TeamSite was acquired by Autonomy for $775M back in 2009, which was sold to HP in 2011, the portfolio was generating greater than the current acquisition.
Last November, HP officially became two publicly held companies: HP Inc., which largely consists of personal computers and printers, and Hewlett-Packard Enterprise, which sells computer servers, data storage, networking, software and consulting services intended for business use. HP executives expected that the split would enable each new entity to better compete in a tough market. HP also cut 25,000 to 30,000 positions at this time, mostly from the HP Enterprise - Business and Technology Services unit, as a part of the restructuring.
This year, first-quarter revenue for HP Inc fell 12 percent to $12.2 billion compared to the same quarter last year, while HP Enterprise, reported first quarter net revenue of $12.7 billion, up 4 percent compared to the previous year.
The software assets OpenText purchased, include: HP TeamSite, a modern multi-channel digital experience management platform for web content management, HP MediaBin, a digital asset management (DAM) solution, HP Qfiniti, an intelligent workforce optimization solution designed to improve enterprise contact center management, as well as HP Explore, HP Aurasma, and HP Optimost. The HP assets will predominantly drive financial performance.
These products come from the HP Engage line which havn’t been included in the Hewlett Packard Enterprise during the company split. Based on this detail, Scott Liewehr, the co-host with the CMS-Connected Show and CEO & Co-founder of Digital Clarity Group, assumes that this meant they’d be selling it off as soon as they could find a buyer.
It’s now more obvious that HP already intended a while ago to divest some assets and streamline its products, so the company can focus on its core business to keep its market share as the PC market drops.
"Autonomy, then later HP, never invested in the hard work it was going to take to keep its customer experience portfolio of TeamSite, MediaBin, and Optimost relevant in a market being disputed by open source and the cloud," said Tom Wentworth, Chief Marketing Officer, RapidMiner. "TeamSite once held a dominant market position, but a series of poor decisions during the Autonomy era led to its demise."
On the other hand, OpenText has been buying and selling WCM and DAM tools to complement its current software portfolio, particularly its Customer Experience Management and Cloud offerings. The primary goal is to enhance the multi-channel digital experience of OpenText's customers by offering a vast array of software solutions in marketing optimization, mobile marketing, and voice of the customer programs.
Here is the analysis of OpenText Core by Peter Lalonde:
The company serves organizations, mid-market companies, and government agencies worldwide. It has strategic partnerships with SAP AG, Microsoft Corporation, and Oracle Corporation. Following this acquisition, OpenText will be able to reach out to a larger and more complex customer database in order to sell its Enterprise Information Management solutions. For this reason, although some aspects of the acquired HP Inc. products overlap with the existing products in its current software portfolio, OpenText will be successful in managing them separately in order to seize the cross-selling opportunities.
At the end of the day, OpenText wants this deal to result in:
Expanding Enterprise Information Management market leadership
Expanding focus on cloud services
Increasing its financial performance
This transaction falls in line with other recent OpenText deals, which have been cut to increase cash-generating revenues by $65-75 million each year. OpenText's most recent financial results exceeded Wall Street expectations, with fiscal second-quarter net income of $87.7 million, compared to $74.5 million in the same quarter last year.
The biggest four companies in the legacy WCM market, Sitecore, Adobe, Acquia, and Oracle, seem to be falling further behind in regards to the newer Java-based and open source platforms: Hippo, Jahia, and Magnolia. For this reason, it will be even more interesting to see how this merger of the HP suite and existing OpenText intellectual property will affect OpenText's position in the market. The deal is expected to close in the fourth quarter of the company's 2016 financial year.