HP Sells its CCM Assets to OpenText for $315 Million
OpenText Corporation, a Waterloo, Ontario-based enterprise information management provider, announced it would acquire HP Inc.'s Customer Communications Management (CCM) assets for $315 million.
The assets include HP Exstream, HP Output Management, HP TeleForm, and HP LiquidOffice for customer communications management, process automation, and document delivery solutions. OpenText officials estimated the assets acquired will generate between $110 million and $125 million in annualized revenues. OpenText and HP Inc. also announced that they are exploring opportunities to work together in the future to expand their software solutions to customers and serve a broad range of customer needs.
This isn’t the first time OpenText has snapped up HP assets. In April, as CMS-Connected reported, the company 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. On the heels of the announcement, Scott Liewehr, the co-host with the CMS-Connected Show and CEO & Co-founder of Digital Clarity Group, also shared his inside scoop on why HP has been dumping its customer experience software when it’s the age of the customer on the show:
HP’s Restructuring Plan
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.
HP’s decision to divest all these technologies is simply related to HP’s bigger strategy of bringing more focus to their core business competencies. Therefore, the market opportunity for these solutions is not their concern right now.
Speaking of strategy, HP CEO Dion Weisler recently said he is aiming to increase the percentage of channel sales at the $55 billion company from 80 percent to 87 percent of total sales by the end of the year.
"We are investing more of our business in increased R&D across core growth and our future," said Weisler in a speech at the HP Industry Analyst Summit 2016, being held this week at the Hyatt Regency Harborside in Boston. "We are investing in our partners and our go-to-market motions."
The deal makes sense to HP as the company wants to focus on product innovations to give a boost to its revenues. HP also announced its decision to accelerate the restructuring plan by reducing the total workforce by 3,000 positions by the end of fiscal 2016 and streamlining processes.
In a statement, HP also said the sale is consistent with its "focus on optimizing its portfolio for long-term growth and its partner-centric approach to integrating best-of-breed software into its document workflow solutions."
"The transaction strengthens the existing HP and OpenText partnership and benefits customers by combining OpenText's presence in document and content management solutions with HP's leadership in managed print services," noted HP in the statement.
From the financial perspective, the current sale price of $315 million suggests 2.5-2.9 times the revenue multiple paid for the assets. The total annual revenue Hewlett-Packard’s CCM software assets generate is around $110-125 million. The revenue associated with the deal will be another financial source supporting HPQ's Commercial Hardware business unit and its R&D efforts.
On the other hand, HP Inc is not the only one who has been under the restructuring. As we reported in March, UK-based content management and language translation company, SDL announced its plan to divest parts of their CXM business in order to drive efficiency and invest in the platforms they need for future growth.
Is OpenText Changing?
According to OpenText’s acquisition history, the enterprise has been treating the buyouts as another revenue stream, but these recent acquisitions from HP seem more promising to be a part of a long-term strategy as OpenText now has a great chance to orchestrate a fully incorporated and integrated CCM and CX suite.
OpenText said in a news release that the latest acquisition enables it to "better serve its customers by offering a wider set of customer communications management capabilities in areas including authoring, workflow, and composition for multichannel document presentment and interactive communications." The officials stated these solutions will complement OpenText StreamServe, OpenText MediaManager and two platforms OpenText acquired in April from HP — OpenText TeamSite and OpenText MediaBin. Up to Friday's close, OpenText's shares had risen 44% over the last 12 months, while HP's shares fell nearly 10%.
Industrial Alliance Securities Analyst Blair Abernethy notes that the deals being taken together are not slam dunks, but complementary pieces of the puzzle: “In our view, these tools, while not likely high-growth product lines, complement and reinforce OpenText’s extensive Enterprise Information Management product offering,” says the analyst. “We see near-term upside to our target from the pending HP and Recommind, a provider of e-discovery and information analytics, acquisitions (not yet in our estimates), as well as from the potential Documentum acquisition, which could occur in the next few weeks.”
Although there is not much official information regarding how well the assets OpenText acquired from HP in April have been integrated so far, the company is expected to share an update on the CXM assets at Enterprise World 2016 in Nashville,TN July 11th-14th. We will shed light on the aftermath of the purchased assets more in subsequent posts as events unfold.
Venus is the Media Reporter for CMS-Connected, with one of her tasks to write thorough articles by creating the most up-to-date and engaging content using B2B digital marketing. She enjoys increasing brand equity and conversion through the strategic use of social media channels and integrated media marketing plans.