Open Text takes over Hummingbird: Will it work?

Hummingbird Communications’s decision to accept a takeover bid from Open Text Corp. has left the industry wondering how the two content management firms will fit together and the future of their product lines.

Late Friday Hummingbird spurned an earlier offer from Palo Alto, Calif.-based Symphony Technology Group, which had proposed paying US$465-million for the firm last month, in favour of Open Text, which will spend 10 cents a share more, or US$489 million. Hummingbird is based in Toronto, while Open Text is headquartered in Waterloo, Ont.

Hummingbird had been criticized for previously accepting an offer from Symphony that some financial analysts said was too low. But Melissa Webster, who analyzes the content management sector at Framingham, Mass.-based IDC, said that may have all been part of the firm’s strategy.

“Symphony gave them sort of a floor price, which allowed them to go out to market and attract strategic partners,” she said. “It’s certainly worth ten cents a share more to have a positive board rather than making it a hostile takeover.”

The Open Text takeover came as bad news to Hummingbird partners such as Ottawa-based Information Solutions Consulting, whose president Marc Legault was on site Tuesday at a customer that is migrating to its content management suite because Open Text had bought the maker of its legacy application.

“They’re worried about it, as very well they should be,” he said. “I don’t know what it’s going to mean. If (Open Text) is clever and keeps (Hummingbird’s product) going then great, but if they’re just buying it out, I’m not going to be very happy about it.”

Hummingbird’s biggest marquee client may be the government of Canada, which has adopted its content management software in a variety of federal departments. An Ottawa company called Coradix is playing a major role in that implementation, and its president, Anthony Carmanico, said the Open Text deal probably wouldn’t cause much concern on Parliament Hill.

“It means absolutely nothing in the tactical short-term, but it could be good over the long term,” he said. “It’s been rumbled about over the past year at least that Hummingbird’s going to get bought. I personally felt that Open Text might be a better win-win than that Symphony bid, only because I didn’t know much about Symphony.”

Webster said there is considerable overlap between Open Text and Hummingbird’s product lines, which may influence its roadmap.

“In the past Open Text has rebranded everything as Livelink,” she said, referring to Open Text’s flagship content management system. “I think they have a tougher M&A challenge ahead than they’ve had in the past to digest this acquisition.”

Like Hummingbird, which had bought a number of smaller content management players both here and in Europe, Open Text has gotten bigger in the last few years from a financial reporting perspective, but its total revenue has been flat, Webster added.

“If you look at the organic growth that’s happened, they actually haven’t had much,” she said.

The consolidation in the content management space, which includes EMC’s acquisition of Documentum, hasn’t led many enterprises to put off projects, Carmanico said, but may change who gets invited to bid.

“They do take it into consideration when they’re selecting the tool,” he said. “People get nervous about implementing an enterprise-wide piece of software if it’s from a company whose sales are less than $20 million.”

On the other hand, Webster says she sees no shortage of smaller startups in the content management space. “I track about 150, and I’m sure I’m not getting them all,” she said. “Some are very interesting technology areas.”

Open Text, meanwhile, moved ahead with business Tuesday by announcing the latest release of FirstClass, a software product it gained through the acquisition of Centrinity several years ago.

Comment: info@itbusiness.ca

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