EMC To Acquire DocumentumEMC To Acquire Documentum

EMC Corp., the storage leader, shook up the market today when it unveiled plans to acquire Documentum Inc. in a stock swap valued at around $1.7 billion.

The features and capabilities offered by Documentum, the leading provider of content-management software, fit nicely with EMC's plans for information life-cycle management, which involves maintaining control over documents from creation to deletion. Documentum would move EMC further away from it's hardware heritage, and create a more complete software shell for storage systems such as the EMC Centera content-addressable box.

Documentum gains access to the world's largest businesses, most of which are EMC customers, and it could benefit from EMC's strong direct sales force. Documentum's products join a roster of EMC software products that, for example, allow customers to mirror production data over long distances.

Documentum CEO Dave DeWalt, who will be president of EMC's Documentum division, says he's long sensed that a billion-dollar market for managing unstructured content was there for the taking. But he had grown concerned that Documentum's limitations wouldn't allow it to capitalize on the opportunity, even at the 31% annual growth rate it reported Tuesday in preliminary financial results for the third quarter ended Sept. 30.

Documentum had been looking to achieve the desired growth through acquisitions, but DeWalt says it became apparent that strategy presented too much risk to investors. "I have the product," he says. "What I've been missing is the sales capacity, the channel capacity, and the customer reach." Whereas Documentum has a total of 400 field sales personnel, EMC boasts 10,000 field sales and service reps.

One industry analyst considers the acquisition "a gutsy move" for EMC because it represents a brand new market and customer support could be a problem. "It's a clear strategy for EMC," says John Webster, an analyst at Data Mobility Group. "But it's not clear that Documentum customers will support the merger."

The move follows EMC's return to growth mode with a $1.2 billion acquisition of Legato Systems Inc., announced in July. At that time, the company indicated another similarly sized buy was on the horizon.