EMC Takes Captiva to Digitize Documents

EMC agreed to acquire Captiva Software for $275 million, a buy that could help its customers turn paper-based information into digital documents.

Captiva is a specialist in an emerging enterprise content management (ECM) niche called input management software, which turns paper into digital documents for distribution among computers.

Captiva’s software digitally captures documents using scanners, fax machines, or other electronic devices and pulls out the information contained within.

Captiva then applies business rules and decision processes to ensure accuracy, and the results are exported into content management information systems, which dovetails perfectly with EMC’s plans to get more customer information into its ECM platform.

EMC can then use the information to trigger processes such as loan processing in retail banking and policy and claims management in insurance.

EMC said in a statement the niche has become increasingly strategic for companies concerned about managing their glut of information.

More and more companies are getting away from costly, inefficient paper document exchange in order to electronically digitize and categorize their information. This can also speed up business processes and yield more accurate and timely response in regulatory compliance situations.

EMC said the purchase is a natural extension to the ECM platform it acquired from Documentum in 2003. It’s also the latest example of how EMC has been fattening its software portfolio in the name of its information lifecycle management (ILM) effort for managing data from its inception until its destruction.

EMC Software President Dave DeWalt said in a statement the acquisition will be an increasingly important element of EMC’s enterprise archiving strategy. This plan calls for EMC to help customers efficiently classify, retain, retrieve, search and access data across structured information such as XML files and unstructured information such as e-mails and X-rays.

The Captiva bid comes at an busy time for EMC.

Just released third quarter earnings showed that EMC’s software license and maintenance revenues continue to blossom, growing 16 percent to $865 million, or 37 percent of EMC’s revenues.

During the earnings conference call with financial analysts, EMC President and CEO Joseph Tucci preempted any questions about acquisitions by saying EMC would be buying more EMC, referring to the company’s planned $1 billion stock buyback for 2005.

The deal isn’t a total surprise either because Captiva and EMC have been partners since 1997.

Captiva, whose competition includes Kofax and Verity, is based in San Diego and counts half of the Global 2000 among its more than 5,000 customers. EMC said it will continue to develop Captiva software as an open platform. But until the deal closes, EMC won’t discuss integration plans for the company regarding office and employee retention.

The Hopkinton, Mass., information systems vendor EMC will pay $22.25 per share in cash for Captiva in a deal that should close in late 2005 or early 2006.

Should the deal succeed, EMC expects to take a charge of approximately $15 million to $20 million for the value of Captiva’s in-process research and development costs.

In related news, Tucci will become chairman of the board of directors January 1, 2006 following the resignation of Mike Ruettgers, who has been EMC’s chairman since January 2001.

Also, EMC’s board voted to provide that any director nominee in an uncontested election who receives a “withhold” vote representing a majority of the votes properly cast shall offer his or her resignation to the board.

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