Open Text acquiring Vignette

One content management player is buying another in a deal worth $310 million

Open Text said Wednesday it plans to acquire fellow content management tools provider Vignette for about US$310 million in cash and stock. The deal is expected to be finalized in the second half of this year.

The combined company will make Open Text, already one of the content management sector's few large independent companies, even bigger. Open Text, based in Waterloo, Ontario, Canada, has 46,000 customers and reported $725 million in revenue for 2008.

Its pending deal to buy Vignette follows the acquisition last year of data capture vendor Captaris for $131 million, and falls in line with a general trend toward consolidation in the content management arena. Autonomy recently announced its intentions to buy Open Text's rival Interwoven for $775 million.

Vignette has struggled in recent years, leading to widespread speculation it was ripe for a sale.

Now that one is about to occur, significant questions loom about Vignette's fate, since there is "a tremendous amount of overlap" between its products and Open Text's, said 451 Group analyst Kathleen Reidy.

However, Vignette's WCM (web content management) software is "a little higher-end" than Open Text's, she added. "You could make the argument that Vignette will become the more enterprise WCM option."

Meanwhile, the WCM market's dynamics are changing, according to Reidy. "Just because the bigger players have been bought there's no shortage of new vendors out there," she said.

The sort of million-dollar deals for large enterprises that Vignette and Interwoven have typically done only represent a small percentage of the demand for WCM software, leaving plenty of room for alternatives, from commercial open-source vendors like Alfresco to various SaaS (software-as-a-service) options, she said.

And while core WCM technology, such as document repositories, is fairly commoditized, there remains room for innovation, such as making tools easier for nontechnical workers to use, Reidy added.

"Web content management's point was to remove IT bottlenecks from Web publishing. ... But the amount of development involvement in changing [site] layout or putting up content has always remained higher than it was supposed to be," she said.

Open Text executives plan to discuss the pending acquisition during its third-quarter earnings conference call later Wednesday.

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