Thursday, July 06, 2006

Opentext to acquire Hummingbird - first (and second) thoughts?

After Symphony moved to take on Hummingbird there was a great deal of speculation that this would only be a staging post for Hummingbird. Now OpenText has put in a higher offer and looks to be serious about taking Hummingbird over. (see update to original post at bottom of page)

OpenText is such an 'interesting' company :-) I have loved and loathed them, and as an analyst was certainly loathed at times - but if not loved, then certainly tolerated on occassion by them.

They have some excellent technology - as do Hummingbird, but the last few years have seen both companies do some pretty crazy things. Hummingbird just became insignificant in the bigger picture, and OpenText appeared to be self destructing.

Yet truthfully, OpenText was always a pretty strong firm, and they deserved to have a least a joint leadership status with Documentum and FileNet. Combined with Hummingbird, and taking their alliances with Oracle and Microsoft to the max, they could emerge the winners in an increasingly messy, but lucrative market.

I hope they succeed in their move - Hummingbird is a fellow Canadian firm, and the cultures will meld together well. But OpenText as well as pulling itself together firmly in some departments, will also need to be pretty tough with Hummingbird - recognizing their strengths, and jettisoning their weaknesses as fast as possible. For this acquistion to succeed OpenText needs it to succeed quickly.

Marketing at both firms has been pitiful at times, as has their alliance and partnering strategies. The bold moves by OpenText with Oracle and Microsoft suggest a change of course, and one that is to be welcomed.

Such an acquistion will also give OpenText the opportunity to continue to clear out and divest of some of their less successful past developments and acquisitions. For a mid sized software firm they have way too many products.

All in all though, I am pleased that the ECM industry still has some life in it - and despite all the dire predictions (my own included) it will not simply come down to a shoot out between the Infrastructure vendors. There is room for a handful of specialists to thrive also - my hope is that OpenText (with Hummingbird) can be one of those.

Who knows, Symphony may come back and ultimately win the battle, but I for one hope not.

Since first posting this on the blog I have been reading Paul Steep of Scotia Capitals views on the proposed acquisition. He is extremely negative on it - and in fairness he gives a fairly comprehensive financial arguement as to why it is a bad deal, and had downgraded his recommendations accordingly.

My take remains that this is a chance for OpenText to pull off something big and stay relevant. I think the two companies together make sense, but also agree with Paul that this cannot go wrong. The problems OpenText have had with iXOS certainly cast a shadow over their ability to handle larger acquisitions - and if successful I really do believe that OpenText has to get very serious indeed about closing and disposing of non core products and services quickly. A major pruning exercise is needed, even though there has already been some ongoing work in that area.
In fact I think they will need to be brutal, and that is not something that is generally part of the Canadian business psyche (generally a good thing) but a leaner and meaner OTX would be no bad thing. I also take slight issue with Paul's assertion that Microsoft will own the ECM space - I do believe that the space will (already is) morphing toward and infrastruture led sell, but the whole of ECM is morphing into something much bigger and more relevant also - there is room for FileNet, Documentum and OpenText to do well - but they all need to change (in fairness the exception there is probably Documentum) and adapt to the new reality. I think OTX is trying to do this, but needs to off load some baggage in the process quickly.

No comments: