The planned acquisition of Nstein Technologies Inc. will give Open Text Corp. semantec analytics technologies and a valuable customer base, both of which are quite compelling to the Waterloo, Ont.-based company, said one analyst.
“Nstein’s core technology with semantec analytics features is new to Open Text and it could really benefit the company and in many ways, bringing Open Text back to its initial roots in the search field,” said George Goodall, senior research analyst with London, Ont.-based Info-Tech Research Group Ltd.
Enterprise content management vendor Open Text announced its intention to acquire the Montreal-based digital content management vendor on Monday in a transaction valued at CD$35 million.
Goodall said, core technologies aside, Nstein’s ancillary technologies in digital asset management (DAM) and Web content management (WCM) acquired in the last couple of years “will have a bit of a tenuous position” because Open Text already has numerous offerings in those areas from its own acquisitions. Open Text previously bought Vignette and Hummingbird for WCM, and Artesia and eMotion for DAM.
As for Nstein, it bought France-based WCM vendor Eurocortex in 2006, and UK-based DAM vendor Picdar in 2008.
Melissa Webster, vice-president of content and digital media technologies with IDC Ltd. in Framingham, Mass., thinks Open Text is probably more interested in Nstein’s text mining technology than in its DAM and WCM offerings given the duplication in portfolios. Webster said if Nstein ends up reporting to Open Text senior vice-president and former Artesia CEO Scott Bowen, then it’s safe to say the company wants the DAM and WCM technologies. But, if it reports to a core development team, then the interest is clearly in the text analytics, she said.
An Open Text spokesperson said the company has not yet made any determinations as to whom Nstein will report, preferring to wait till the deal is closed to divulge more on the matter. The deal is expected to close in the spring of 2010 subject to shareholder and regulatory approvals.
With a possible bulls-eye on text analytics, Webster said Open Text will likely then upsell to customers on its own WCM and DAM offerings. “I would see Open Text looking to migrate the customer base to Open Text products and probably shut those efforts down over time once they can safely transition customers,” she said.
Besides, Webster thinks Open Text is already challenged with the four WCM acquisitions of the past several years. “The last thing it needs is a fifth,” she said.
Webster expects some layoffs as a result of the merger because Open Text has historically been quick to scale down acquisition headcounts. “They have shown again and again that they know how to manage and deliver on their operating model, and they assimilate acquisitions quickly,” said Webster.
That said, Webster notes Open Text has always been good with supporting the customers of those companies it buys while it figures out a migration roadmap.
Goodall said the acquisition is a good fit for both companies given the compatible technologies and consistent revenue stream and customer base. In the case of Nstein, it arrived at the point where it had to expand or be acquired, he said. In the last couple of years, Goodall said Nstein had not expanded as quickly as it should have to keep up with larger content management vendors like Documentum (bought by EMC Corp.) and Open Text.
As an enterprise, Nstein had been having trouble managing the sheer size of its sales organization, said Goodall. “And when we look at content management in general, it is increasingly becoming a commodity type of technology,” he said.
