Hummingbird’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 about the future of their product lines.
Hummingbird Communications’ spurned an earlier offer from Palo Alto, Calif.-based Symphony Technology Group, which 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 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 10 cents a share more to have a positive board rather than making it a hostile takeover.”
The takeover came as bad news to Hummingbird partners such as Ottawa-based Information Solutions Consulting, whose president, Marc Legault, was interviewed at a customer site 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. Coradix, an Ottawa company, 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. “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.”
Like Hummingbird, which has 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 said.
Consolidation in the content management space, including 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.”
But Webster 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.