No fiesta
Every time an acquisition is published, it is time to celebrate. Well, it depends for whom.
I have learnt to love acquisition as a shareholder of the acquired company. I have learnt to rebuild teams, business and clients’ trust on the ruins of the acquired companies as a manager, several times. I have learnt to learn how tough, and rare, it was to successfully acquire a company as an investor, an employee or whatever, it is always a challenge.

Mission accomplished?
So I am not the kind to say “congrats” during an acquisition but to the team in charge of the acquisition, of course. They have “accomplished the mission” and anyone who had been in such business knows how tricky it can sometimes be. So yes, congrats to the management team of Day software, they have sold the company very successfully.
But from my point of view, there is not that much to celebrate during an acquisition, especially for many of the employees and for many of the clients. The most difficult part is still to come. Acquisition does not matter so much compare to integration. It is like celebrating a deal whereas what matters is the Go Live of a project, not the signature of the contract. 

Acquisition means “risky business”
OK let’s write “challenging” instead of “risky” to be positive.
I have not read much today about how a mid size company with a strong Swiss attitude and an open source philosophy will fit into a mainly US centric international proprietary software company. I have also learnt to learn that during acquisitions people may seem to matter, but not so much in reality. Not because you don’t want to, but because you cannot take care of too many details and that’s what individuals are during an acquisition. Of course some individuals will find great opportunities thanks to the deal, that not the point, but just to say that an acquisition is not a fiesta for everyone, far from that: it mainly means “risky business”.
And one of the key advantages of Day has been several very gifted, skills and committed individuals. I am wondering how Adobe will handle the famous “The surprising truth about what motivates us”
Day Software was one of the rare independent high end WCM vendor and will now be just one of the products of a major software company. That’s a major evolution. Uncertainty will prevail for weeks if not months like for any similar acquisition, at least for many employees, even if, of course, Adobe may argue the opposite. Many are speculating and will speculate about the products integration, the strategic fit, the risks, the advantages, the constraints and so on. I don’t really care so much as my employer is a competitor so I have to focus on my clients, Jahia's team (my employer) and our own product but I would like to conclude my post on something lighter as I cannot prevent myself from motivating Day's shareholder to agree to on this acquisition. Let me be more specific:

Four Reasons to sell your shares to Adobe
1.      The price is right
The share’s price of the company was extremely high before the acquisition, and I assumed the market was expecting something irrational, sorry I meant to say “exceptional”. And the market is so often right, so now it is really time to do something guys. Frankly I am impressed. I can write for pages why this valuation looks so unreal to me – maybe because I am coming from a different world - but frankly just sell for that price your shares. Exaggerating, I can write you are more likely to be hit by an asteroid tomorrow morning than to get a better deal soon.
2.      That’s good for my business
Everybody knows an acquisition is always good for the business of the competition at least for the months to come. Beyond more than a year, as usual in this kind of business, it does not really matter that much, that’s another time frame and we always have to face competitors of many kinds: that’s business. What matters is adaptation and anticipation, not conjecture. So for the time being, I believe that’s good news for my employer’s business development as we have very frequently met Day software both in Europe and North America these last months.
3.      You will give Adobe a cooler image
I really like the spirit and the values of the Day team. I don’t believe in miracles but I hope they will influence Adobe somewhere in a positive way. At least, they won’t be of any bad influence!
4.      This summer is so boring like any summer, thanks for the show
For different reasons, and somewhat surprisingly, daily business is always thriving during July and August but conversely market news is usually so boring during these sunny weeks in Europe too. At last some news to really speak about during the summer break. Cool. And just before the CMS geek up cessions! Very cool.

So please give me a favor, just sell your shares to Adobe.

Further readings:

Analysis, interesting comments and some (inevitable) speculation from our WCM industry gurus: Adobe to acquire Day – First Take ECM perspective

Great critics – as usual – from Seth Gottlieb: Will Day stay committed to web standards under Adobe’s ownership?

CMS Wire article: Web CMS: Adobe Buys Day Software for US$ 240 Million

Boris-Magnolia’s own publicity but with several excellent remarks: http://www.betterfasterbigger.com/2010/07/day-to-be-acquired-by-adobe.html

Jon on tech blog post: http://jonontech.com/2010/07/28/a-fine-day-for-adobe/

Jeff Potts who was very quick to write about the acquisition: Adobe acquires Day Software for $240 million

“The worst threat for a good plan is the dream of becoming a perfect plan” – Carl von Clausewitz.

On July the 29^th, Day Software (SIX: DAYN) published quite impressive results for the first half of 2009 and actually that was the 2^nd quarter which was impressive as the first one was not better than 2008’s 1Q. (Read my blog post, the paragraph about Day). Therefore, even if I am a little bit paranoiac by definition of my job, I just tried to find out how they have been able to use their 4Q results – quite bad – to make the 1H looking better by “making it even worst” (e.g. there is often some revenues you can postpone and charges you can anticipate) but I can’t really see how, at least significantly, as the nice part of the semester... is the second quarter. So in conclusion, Day, for me, just made an excellent quarter, really. And that’s good news both the open source and for the WCM industry.

Considering the huge investment done into their new product and its release date (4Q08), it is not such a surprise but, in 2009, it is still excellent news. Of course one good quarter does not mean so much – neither a bad one does – but we can hope Day will make too a decent, good or even maybe excellent 2H and it would be a – bad – surprise – if there second half would be not showing some bright colours again. Indeed, the main new push is given by the release of their new product and, I hope, by the top management, who changed one year ago. Last and not least, the global economic context should not really get worse worldwide (can it really be worse btw? !). So, to me, there is no challenge to make a second good half, it looks to me to be more a “duty” for their sales team! (Yes I am putting here some pressure, I hope the Day’s sales team will appreciate :) ).

So what are really the main challenges of Day for 2010?

Not surprisingly, Day points out the necessity to invest in sales and marketing. But this is a fragmented market, both big and small. It is big when you take the sum of its small independent and fragmented markets. But indeed small and fragmented into regional markets, e.g. a German country manager will not sell easily, far from that, to a French client or conversely. And building a country’s network/reputation takes often time, especially when you are just a few months ahead of opening new premises locally. Day has invested already into countries’ developments and Day’s visibility is quite good, as they are targeting majors companies and already broadly covered by analysts. So the main issue seems to me for the next months to be able to develop new markets thanks to the existing local sales team and those likely to reinforce the sales group. Even if Day is giving public numbers on sales & marketing costs, the efficiency of these investments would not be easy to evaluate as there is, so far, no breakdown by country publicly published. If I were a shareholder of Day, I would ask for it and will demand how much will come from the business development program compare with the existing and recurrent market where Day’s reached the “critical mass” to develop itself given the local team, local clients in production and skilled local integrators, but that’s another story.

Of course for the mid term and as usual, Day will have to be again very creative about the product like any similar vendor. That’s their reputation so this is a challenge which does not concern me too much. The main challenge is overconfidence, Day has had several years not so successful, and strangely it keeps you away from overconfidence. Several successful quarters would not mean they don't not need to reinvent everything again. This business is to be good at changing, evolving, and anticipating and even the more modest can forget it when success is coming.

But Day’s ability to create value for their shareholders seems trickier when you have a closed look at the company’s history. Their accumulated deficits – not only during the crazy years of the dotcom burst even if it makes the biggest part of this cake – are really huge. Day has very few debts but has burnt so much cash of its investors in the past that it must now prove its ability to create value from it. The recently appointed CEO is very experienced, and will have to demonstrate the ability of the company to invest wisely without losing the strong creativity skills of its engineers. Obviously, and they cannot be blamed for that, there are very proud of their product, they may now need to become proud of their company’s financials.

Day is indeed famous for having heavily invested into open source projects – given back to the community - and is definitively a key player for several very promising initiatives. It would be great seeing Day’s results in the future again profitable and its benefits regularly growing. Very few open source companies are publicly listed, and the private ones have often a corporate communication far from being transparent. So such performances would show, based on facts, the financial advantage of the open source business and the Day R&D team could be extremely proud of that.

Nice challenge for a skilled manager like Mr. Hansen and his team, and the success will be easy to evaluate.

wfrtipx5h7

For the last years, consolidation has been very strong into the ECM/WCM/Portal industry. You cannot find any longer so many public companies but I have listed them and will do my best to update the calendar of results on a quarterly basis.

Most of the time, the software is a part of the business, or the “content management software” is a part of the business. This definition is a little bit fuzzy – I agree- but that’s where this market is too. So I will mainly focus at this part as I am covering the “content management” business only.

(CET Time)

2Q09 results publications are on going, you don’t need to be an analyst to see there are mixed results… Tough years are not so tough for some, but conversely you can’t judge on one or two missed quarters – or brilliant quarters. I would not bet so much on the likely-to-be-winners of this downturn, yet.

I am certainly not an analyst and won’t pretend at all defining a global trend into the market, but I like to make some free comments about these results:

Autonomy – Interwoven (LSE: AU): published impressive financial results (Fully diluted EPS grew by 61%, I am impressed…), once again. No doubts about their ability to grow organically. Their 50% of recurrent business looks quite low for such a big company (for this market)... I am positively impressed by their ability to convince new clients. That said, their acquisitions skills have been more questioned in the past, and I am not sure they are improving so much reading their PR and their slides: “Interwoven integration essentially complete with group gross margins rebounding to pre-acquisition levels” : I am translating freely this quote in “OK Interwoven margins went down during several months, so what?”. Due to costs of restructuring or something else? We don’t know, but as they don’t explicitly give this reason, I will look at the evolution of this integration closely. We don’t get either any numbers about this acquisition so we can’t say if it is or not a good deal – done for more than 700 M$. When you don’t show up numbers, you are rarely proud of them. And when the MD speaks about the future, the trend is explicit, there is no trend: Dr. Lynch concluded, "Despite the continued uncertainty in the markets, we remain cautiously optimistic.”. Whatever the results of the next quarter will be, he will be right. Nice shot Dr Lynch.

Open Text (NASDAQ: OTEX): The other cash-machine of this industry has recently acquired Vignette. Whereas I do understand the value of the Autonomy acquisition of Interwoven (even if the execution seems not to be “smooth” but that not a surprise either), I have been quite sceptical about the integration of Vignette into Open text (read my blog’s post). Open text will detail its integration plan of Vignette during its next results’ conference call (August, the 20^th). I want to read numbers, not a general and useless bullshit such as “cross selling synergies”! I want to see how they will propose to their clients, investors and employees a good story. I will also closely read anything about how they see the future’s trend.

Red Hat (NYSE: RHT): the open source champion – extremely profitable too - is aiming at the application business but does not provide yet any significant financial information about this (likely to be small) part of their business (Jboss portal), so I just don’t cover it so far. But it may change considering their growing interest into this content management software business…

Day (SIX: DAYN): the Swiss WCM vendor (last one to be publicly listed and focus only at WCM…) will release its results in August, the 7^th. Unfortunately we don’t have the chance to have any other information about the 1Q09 but their revenues (7.4 MCHF versus… the same 7.4 MCHF in 2008) and this laconic quote: “Day Software […] today reconfirmed guidance for financial results for 1H 2009 based on strong customer growth in Q1 2009 from continued momentum for its ground-breaking CQ5 platform”. So I will just have a close look at their costs evolution since 2008 and the new projects revenues.

IBM (NYSE: IBM) is reporting global results for their software operations, so I am more focusing at the global trend. The company is heavily followed and I don’t have anything brilliant to add. Same for Oracle (NASDAQ: ORCL). Their revenues are clearly going down (IBM 1Q09 and Oracle 1Q09) but I just believe – too bad for the open source gurus – it is from far too soon to believe in the imminent extinction of the dinosaurs and I am not even yet convinced of their real decline.

Microsoft (NASDAQ: MSFT): everybody will look at Sharepoint 2010 results… in 2010. Period.

SAP (NYSE: SAP): the German giant has been seriously hit by the economic downturn. Will it recover quickly? To be followed in July the 29^th. To be also followed: their implication into Portal (SAP Portal) and also of course ECM through SAP Venture (Alfresco, Newgen, …) or thanks to their long relationship with Open Text of course. Consolidation seems to be trendy in 2009 again; but will SAP take the move in the middle of the storm? Seems to be unlikely isn’t it? OK so I have just written it may come as M&A are by definition surprising.

EMC (NYSE: EMC): 2Q09 results to be published later today… I will comment them if… I find something interesting to say!

SDL (LSE: SDL): the mother company of Tridion should release in August their mid term 2009 results. To be followed up…

Alterian (LSE: ALN) cannot care less of their investors, and the acquisition of the CMS Mediasurface cannot be commented therefore. Their last release is just something they did because they had too and basically they gave more or less no relevant information. At least they have the honesty to admit it (“Alterian […] today publishes its Interim Management Statement covering the period from 1 April 2009  to the date of this announcement, as required by the Listing Authority disclosure rules.”) but some care for their investors would not be inappropriate.

 Please let me know which (publicly listed) guy I forgot …

Disclosure: No position but I am working for a privately hold WCM, open source, software vendor (Jahia), who competes with the software sold by the here above vendors.