Technology Science - Canada’s Open Text last of its kind after HP deal

Latest Technology and Science News

Waterloo, Ont.-based Open Text Corp. had revenues of $912 million US in 2010. It has about 4450 employees. Waterloo, Ont.-based Open Text Corp. had revenues of $912 million US in 2010. It has about 4450 employees. (Open Text)Tech giants such as IBM and SAP are likely casting a hungry eye on business software provider Open Text Corp. now that its last independent competitor has been snapped up by Hewlett Packard, analysts say.

HP announced Thursday it was buying Autonomy Corp. for $10 billion US. It's part of a major swing away from consumer products such as PCs, tablets and smartphones, and an expanded focus by HP on business technology products and services. U.K.-based Autonomy specializes in software that manages and searches unstructured information within businesses' internal networks.

Waterloo, Ontario-based Open Text similarly specializes in helping companies manage the growing mountains of data produced and used in their daily operations. But Open Text takes a different approach â€Â" relying on organizing and tagging content rather than a powerful search capability, said Nigel Wallis, an analyst with IDC Canada whose research is focused on business software and applications.

However, among competitors within its field, Open Text holds the distinction of never having been bought out by a much bigger technology company.

"They are the last major independent that's still standing," Wallis said in an interview Friday.

IBM likely buyer: analyst

He added that he wouldn't be surprised if business technology companies such as IBM and Oracle were in takeover talks with Open Text, which is already designed to work with Oracle, Microsoft and SAP software.

In a note to investors Friday, National Bank analyst Kris Thompson said he and his colleagues view IBM as the "most likely buyer" and do not expect Microsoft to make a bid.

"A bidding war between SAP and Oracle is another real possibility," the note added.

Wallis said potential buyers will probably have to pay a hefty premium for Open Text because it is the last available company in a field that is growing very quickly, due to exponential growth in the rate at which humans are consuming data. By 2020, he said, data usage is expected to reach 35 zetabytes per year â€Â" equivalent to the amount needed to fill 760 billion dual-layer Blu-Ray discs.

"That's a huge opportunity for companies and vendors to try and manage and optimize on behalf of the IT organization," he added.

He noted that most major technology companies have tried to gain a foothold in this area recent years â€Â" IBM by acquiring FileNet in 2006, Adobe by buying Day Software in 2010 and Microsoft through its Sharepoint platform.

Active market for mergers

Richard Tse, an analyst with Toronto-based Cormark Securities, said the area known as enterprise content management, "has been probably the most active market in terms of mergers and acquisitions for the last eight years."

Analysts say there is huge opportunity in solutions that help companies manage and optimize their growing reams of data. Analysts say there is huge opportunity in solutions that help companies manage and optimize their growing reams of data. iStockHe added that Open Text's earnings growth has been 30 per cent on average in each of the past five years, partly by making targeted acquisitions itself. Its revenues in 2010 were $912 million US.

Analysts observed that the $10 billion paid for Autonomy by HP was a hefty amount.

"It's obviously a bet that they're making that this is going to be an asset that could be meaningful to their growth going forward," Tse said.

Wallis said the deal provides the opportunity for the company to present its HP server and storage clients with an additional information management solution, while providing Autonomy with access to HP's massive client base around the world.

Anne Lapkin, who analyzes Autonomy for technology research firm Gartner, said it's "an incredibly good deal for autonomy," but "it's way too early to tell" if moving away from hardware and focusing on information management will be a successful strategy for HP.

"Everytime that you make that kind of sea change, it involves big risks," she said, predicting that there will be a "significant clash of cultures" that HP and Autonomy will have to cope with.

In the short term, she said, competitors such as Open Text may be able to exploit the natural disorder that results from the merger.

But in the long term, they may find the merged behemoth to be a bigger competitive threat, she added.

"It has the potential of being a very, very powerful partnership."

Recent News

0 komentar