Why Autonomy won’t – or shouldn’t – buy Open Text

At the time of Autonomy’s Q2 results last week, a fair few commentators said an acquisition of Open Text was imminent. We know that a large deal is imminent and the enterprise value of Open Text (OTEX) is in Autonomy’s ball park. Plus OTEX – itself a roll-up machine somewhat akin to Autonomy –  isn’t exactly in the rudest of health right now.

On the earnings calls CEO Mike Lynch said Autonomy’s next major acquisition would not be done to buy growth (we have already expressed our thoughts on that), nor would it be done simply because the price is right. It would have to be a strategic move, a game-changer. Well, OTEX isn’t that, in our mind at least. So what would such a deal give Autonomy?

Sure, it would give it practically all the document management business in the legal sector. But so what? Autonomy already has a lot of that via its Interwoven acquisition. It would also bring with it yet more overlapping content management products and a collaboration business being eaten by SharePoint. On the plus side, it would roughly triple Autonomy’s customer base to about 65,000 organizations.

Of course, I could be completely wrong and August 18 could be the date on which that is proved, as it’s OTEX’s Q4 results announcement. That is, if SAP hasn’t got there first.

Still, Tibco or Informatica make far more sense to us as truly strategic acquisitions for Autonomy. But of course, in order to buy something you have to find a willing seller, and we’re not so certain those sorts of companies relish the prospect of ending up inside Autonomy as much as a company that has few other choices might do.

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#1 Research Recap » Blog Archive » In Play Today: Infineon, Ascendis Pharma, Autonomy and Nove Ljubljanska Banka on 07.30.10 at 4:35 pm

[…] 451 Group thinks Autonomy should set their sights past Open Text (OTEX) and look to acquire either Tibco or […]