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EMC to Acquire Documentum for $1.7 Billion

EMC Tuesday added a crucial new piece to its strategy of building a complete information lifecycle management (ILM) portfolio when it agreed to acquire Documentum for $1.7 billion in stock.

ILM is the concept of managing stored data from its inception until its disposal, or "cradle to grave." EMC has been mining this front for the last year and made its first significant acquisition to fill in gaps in its ILM suite earlier this year when it purchased data archiving specialist Legato Systems for $1.3 billion.

But one of the aspects of ILM Hopkinton, Mass.-based EMC has been said to be lacking was enterprise content management (ECM), a gap it will fill should its bid to purchase Docmentum be successful. Pleasanton, Calif.'s, Documentum is a leading provider of enterprise content management software and competes with Hummingbird and FileNet.

Enterprise content management software allows companies to manage their unstructured content, which includes anything from electronic documents such as Web pages and spreadsheets to medical records and audio/video content.

Documentum's ECM platform consists of automated document management, records management, Web content management, digital asset management, and collaboration, which it acquired when it purchased eRoom late last year, in a single content platform. EMC hopes Documentum's software will add a necessary management ingredient to its data protection, storage management, and information management software and storage platforms.

Enterprise Storage Group analyst Brian Babineau said that although EMC did acquire some ECM capabilities with Legato, the purchase of Documentum is the "next logical move up the food chain in application and records management."

"It's an important piece for EMC to be able to control content and make sure it ends up on the hardware platform, " Babineau told internetnews.com. "Even if not, it's a hedge against the commodity hardware market."

Why did EMC go for Documentum of all the players in the space? Documentum's specialty is the biopharmaceutical industry, considered to be a considerable growth sector in the future, Babineau said. "Documentum has a huge content management market share there."

EMC President and CEO Joe Tucci summed up what he thought was a recipe for success on a conference call when he said that EMC, Documentum and LEGATO have collectively achieved a combined total of more than $2 billion in software license and support revenues in the most recent 12 months.

"Documentum enables organizations to organize and manage their growing volumes of unstructured data by leveraging knowledge about that data - information about information," Tucci said.

EMC's relationship with Documentum stretches back to April 2002, when Documentum's platform was integrated with EMC's Centera content addressed storage (CAS) product platform under the EMC Developers Program. EMC intends to operate Documentum as a software division of EMC when the deal closes. It will remain headquartered in Pleasanton and will be led by Documentum CEO Dave DeWalt.

Under terms of the agreement, Documentum stockholders will receive 2.175 shares of EMC stock for each share of Documentum stock. The acquisition is expected to be completed in the first quarter of calendar year 2004.

Upon the deal's completion, EMC expects to take a charge in the quarter the transaction is closed for the value of Documentum's in-process research and development costs and other integration expenses.

In related news Tuesday, EMC said it expects total consolidated revenue for the third quarter to be approximately $1.51 billion and diluted earnings to be 7 cents per share. The company will air 3Q earnings Thursday.