EMC sinks teeth into Documentum

Storage solutions maker EMC Corp. announced plans on Tuesday to acquire content management software company Documentum Inc. – a US$1.7-billion deal that has industry analysts applauding.

According to Hopkinton, Mass.-based EMC, the transaction will combine its networked storage and software for data protection, storage management and information management with Documentum’s enterprise content management, bringing customers better alignment between their content and information infrastructures.

Pleasanton, Calif.-based Documentum is a market leader with its content management offerings, which allow customers to proactively manage unstructured content like Web pages, spreadsheets and audio/video data.

For EMC to expand its offerings through the addition of content management solutions does not come as a surprise to industry experts. According to Nick Wilkoff, senior analyst with Cambridge, Mass.-based Forrester Research, acquiring Documentum will give EMC a set of solutions that the company can provide on top of its original storage data infrastructure, which will better enable EMC to compete against the likes of IBM Corp.

“This is allowing EMC to really go head to head with IBM,” Wilkoff said, explaining that Big Blue has invested a lot of resources into its own content management strategy, which is in full swing after acquiring Tarian Software Inc. last year.

Wilkoff continued that with respect to other potential acquisition targets like Interwoven Inc., Vignette Corp., and FileNet Corp., Documentum is the best bet. The company offers not only document management, but is also a market leader in records management, collaboration and digital asset management, he said.

The interesting view is what EMC has to offer Documentum. Wilkoff explained that despite its leadership in the content management market, Documentum would likely have a tough road ahead if it remains an independent company. He said because the company has all the pieces, it essentially positions itself in direct competition with data infrastructure giants IBM and Oracle Corp.

“Documentum is a successful company in the content management market but is not close to the size of those types of vendors,” Wilkoff said. “If you were to look down the road, this was going to challenge Documentum’s competitive landscape. Now, by joining EMC, they have that level of resources that allows them to compete with other vendors.”

Steve Duplessie, founder and senior analyst with Milford, Mass.-based Enterprise Storage Group, cited three reasons the deal marks a smart move for EMC. Firstly, since the company’s stock is “way too overvalued,” EMC “is playing with the house’s money so to speak.”

“I love the deal financially – the way I look at it, it was free,” Duplessie said.

Secondly, he acknowledged Documentum as a “real software company,” which is a good thing as EMC has historically expressed plans to get into the software business. Lastly, Duplessie said that Documentum fits nicely into EMC’s Lifecycle Management strategy, essentially managing audit trails of documents from the cradle to the grave.

But, Forrester’s Wilkoff expressed concern regarding Documentum’s historically aggressive acquisition strategy. The company acquired four companies in the last two years with two significant purchases within the last nine months – eRoom Technology Inc., and TrueArc.

“It is still a challenge on its own integrating all of those acquisitions,” Wilkoff said. “This adds one more layer of complexity. There is a lot to put together here from a business and technology standpoint.”

After the acquisition is complete in early 2004, Documentum will remain under the control of its CEO David DeWalt and will act as a software division of EMC. Documentum stockholders will receive 2.175 shares of EMC stock for each share of Documentum common stock.

For more information, visit www.emc.com. Documentum is online at www.documentum.com.