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.

I have read since yesterday very much about it, but we don’t know so much. Actually we just know one thing, at what price. Obviously Open Text believes we don’t need to know more, which makes sense to me. In the Open Text F3Q09 Earnings Call Transcript of the 6^th of May, the Open Text management is extremely talkative about not being talkative! Basically the roadmap is “shareholders of Vignette, approve the deal, it is a good deal for you.” I believe so too. A premium of 74% allows them to sell the shares at a price similar to the pre-nervous breakdown of last autumn financial markets. For a declining business (see Vignette last results), such a performance in May 2009 is … just a miracle. So yes, to me, shareholders of Vignette can say “thank you Open Text”.

No doubts some employees of Vignette may unfortunately have a different opinion as lay offs are very likely to be inevitable. But the remaining ones would also find there some personal opportunities. Cynically, I have to say it was obvious that Vignette too needed to apply the famous “Change we need”…

John Shackleton comment “It's probably not appropriate for us to comment on that [integration plan]” is indeed appropriate as the deal is not done but does not help to have confidence on it and does not help either knowing whether or not Open Text made a good deal. But I am not as optimistic as Open Text when they pretend to be able to rebuild a faded famous brand with strong assets (whatever people can say about it). Well, I do believe they have a plan: they want to align their Web Content Management offer with their global strategy and product offer and despite the acquisition of Red dot, they were far from leading this part of the business. This acquisition will help by a way or another. If not through the existing product itself, at least thanks to some skilled engineers now on board of Open Text. Further more, the top management will need to deliver results after having paid the price for trying to. So the acquisition is a clear statement of Open Text commitment to increase their Web Content Management offer, or I really missed something. So I expect Open Text to invest in that business significantly again within the next months.

So is 310 M$ cheap or not? Matt Asay said in August 2008 it was “dirt cheap” (Matt made a brilliant anticipation of the deal btw), I would not be so affirmative. Vignette revenues are not only declining, they are now quite low for such an acquisition price. Sales increase without major additional investments looks unlikely too. So get decent ROI will be tricky, and acquisitions are a risky business (so you expect high ROI). Bloody costs cutting by lay offs of transverse G&A teams, as usual, may not suffice, and far from that. That said, Open Text has shown some real skills about acquisitions, as far as I know, and I don’t really agree with Sam Dean comments about Open Text vision. I am an open source fan, but I can’t forget the strong results of Open Text and its skills to create value for shareholders, even in 2009 (see the last results). I believe Sam is speaking about the wrong guy, one of the rare able to have retained earnings not red – a sad tradition of this business. Anyway, I have never been a great fan of acquisitions based on fuzzy “cross selling synergies” thanks to combined sales network, the perfect scapegoat to hide your real motivations for an acquisition, which we don’t know yet.

Despite real differences, the existing WCMS product of Open Text, Red dot may overlap with Vignette and the product synergies don’t look obvious, far from it (read Thomas Kas “Open Text buys Vignette”). The Open Text portfolio is becoming quite complex, read “Open Text the new CA”, but as a matter of fact, their financials results don’t show where their strategy has not been successful so far.

It is Open Text’s privilege to say nothing about their plans with Vignette, and they might be trusted about them considering what they did in the past. But it looks to me overpriced, despite a perfect time to make acquisitions as market is famous to be strongly oversold. I don’t see where Vignette’s share price has been oversold the last months considering their results and perspectives and a premium 74% for synergies looks to me extremely ambitious for this business. Further more, from a pure strategic point of view, acquiring at a somewhat high price a direct competitor is often mainly opening doors to your other competitors, I have a couple of nice examples in mind of “how shooting yourself in the foot and burning cash simultaneously”. Buying a competitor is often like drinking some Whiskey when you are freezing in the mountains in winter: pleasant first, but pretty nasty for your body very soon and worsening the cold effects at the end!

For 310 M$, I would have been more impressed by Open Text ability to invest internally in R&D and sales to compensate some weaknesses of their existing product Red Dot rather than moving forward into a complex & risky acquisition by definition.

To me, this is pure expression of some lack of confidence into your own capabilities and your ability to improve them. When you pretend to be a leader, the toughest part is often to keep your fighting spirit and entrepreneur creativity.

In conclusion, yes the financials results looks strong but I don’t see in this acquisition something brilliant so far for Open Text, given the price paid and their existing products. I will read carefully the integration plans when it will be released and will add further additional comments.

Disclosure: no position with Open Text (TSX: OTC) or Vignette (Nasdaq: VIGN).