Like July’s $1.3 billion bid for Legato, EMC’s offer for Documentum is an all-stock affair and takes advantage of EMC’s healthy share price that over the last twelve months has risen from $4 to around $14, giving a market capitilization of over $29 billion.
Documentum develops content management software, and its acquisition is part of EMC’s long-standing plan to boost its high-margin software and services sales to compensate for falling margins in the competitive storage hardware market.
EMC has said already that it is not following Veritas Software Corp [VRTS] – the storage industry’s largest software-only supplier – into the emerging market for combined server, applications and storage systems management software – where Hewlett Packard Co [HPQ] and IBM Corp [IBM] are also headed.
EMC has a publicly declared target for 30% of its revenues to come from software and services by 2005. With Legato under its belt it will reach 26% by Q404, and that Documentum will add a couple of percentage points in 2005.
EMC believe content management to be a perfect fit for the company’s strategic direction of information lifecycle management. It claims it has been the single fastest growing software segment in the enterprise.
The emergence of ILM as an all-embracing industry term reflects the fact that driven by data retention regulations and other factors, storage is extending from its traditional focus on live data to embrace unstructured or fixed reference data, which because it is unstructured must be handled with sophisticated archiving, indexing, retrieval, and document routing systems.
Unstructured data includes desktop-generated data such as emails, documents; PowerPoints and web pages, the volumes of which are growing far faster than conventional structured database data. According to EMC, 80% of new data is unstructured data, and Documentum claim knowledge workers spend on average 40% of their time looking for data. Documentum’s software will hopefully fit at this end of ILM. Last quarter it saw revenue up 31% year-on-year at $74 million but posted GAAP earnings of only two cents.
This article was based on material originally published by ComputerWire.
