EMC buys content management vendor Documentum for US$1.7B

FRAMINGHAM (10/14/2003) – Storage vendor EMC Corp. is acquiring enterprise content management vendor Documentum Inc. in a US$1.7 billion stock transaction that will bring together two major players in their individual market segments.

In an announcement today, Hopkinton, Massachusetts-based EMC said the deal will make it easier for customers to store and retrieve their unstructured data through an integrated software and hardware package.

“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 strategic value as EMC continues to evolve,” Joe Tucci, EMC’s president and chief executive officer (CEO), said in a statement.

The move is another step in a continuing wave of consolidation in the content management market as vendors come together to increase their offerings to customers. In August, content management vendor Open Text Corp. in Waterloo, Ontario, announced the acquisition of German Web content management software vendor Gauss Interprise AG, while Stellent Inc. bought digital asset management software vendor Ancept Inc. of Minneapolis.

EMC, which offers a full line of storage systems and software, will now be able to match its products in-house with Documentum content management applications that rely heavily on storage capabilities.

A customer of both EMC and Documentum, Robert Terdeman, vice president and chief technical officer at Rogers Medical Intelligence Solutions of New York, said the deal is great for customers. “I can’t see any downside at all,” he said.

He said his company has been using EMC’s Centera content-addressed storage product, which relies on Documentum software, and has been pleased with the results. What this acquisition does, he said, is advance Documentum in the enterprise by giving it broader appeal. “It also repositions EMC into the world of really managing information, as opposed to managing data,” Terdeman said.

“It looks like a very sensible combination,” said Peter O’Kelly, an analyst at the Patricia Seybold Group Inc. in Boston. For customers, an increasing problem has been organizing, finding and using company information. For many companies, those problems will be easier to fix using a single-source vendor.

Overall, the combination of the two companies will likely shake up the marketplace, O’Kelly said. “This significantly changes the competitive landscape for enterprise content management.”

Robert Markham, an analyst at Forrester Research Inc. in Cambridge, Massachusetts, said the deal is evidence that “enterprise content management and storage need to be thought of in the same breath.”

He called the deal an offensive move by EMC into the enterprise content management market, as well as a defensive move against competitors like Oracle Corp. “This has put Oracle further behind, because Oracle would have probably bought Documentum if EMC didn’t,” he said.

One hurdle remains for EMC, he said: The company still doesn’t offer its own database with its storage and Documentum products.

Mark Lewis, vice president of EMC’s open software operations, said the deal extends his company’s goal of helping customers manage data throughout its life cycle. “We put the pieces together,” he said. “We did look for completeness” in acquiring a content management vendor and chose Documentum because it has experience in unstructured content, digital asset management and much more, he added.

“They understand what needs to be done with the data, and we understand how to do it” with storage, Lewis said.

The Documentum name will live on, he said, although it will become a division of EMC. The Documentum line of products will continue to be sold to customers regardless of their storage system choices, and APIs will continue to be open across the standard interface layers to maintain compatibility with competing products.

“Our objective is to sell value-added layers … not to lock those layers together so the customer has no choice,” Lewis said.

Documentum and EMC have had a partnership deal since April 2002, when EMC introduced EMC Centera, a content-addressed storage product.

“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,” Documentum CEO and President Dave DeWalt said in a statement. “As a result, the combination of Documentum and EMC represents an outstanding opportunity for our stockholders, employees, customers and partners.”

Under the deal, expected to close in the first quarter of 2004, Documentum stockholders will receive 2.175 shares of EMC common stock for each share of Documentum common stock, which closed yesterday at $14.45 per share. The deal is subject to Documentum stockholder and regulatory approvals.

This is the second major deal by EMC in recent months. In July, it announced the acquisition of storage software vendor Legato Systems Inc., a deal expected to close later this month.