Latest ECM Match: Stellent Snaps up Optika

Compression has arrived among enterprise content management players with Stellent announcing it has agreed to acquire Optika for $59 million in stock and cash.

Stellent officials said in a conference call that they believe Colorado Springs, Colo.-based Optika’s software assets will significantly bolster its own document imaging, business process management and compliance capabilities.

Optika’s flagship Acorde software suite allows companies to manage content and streamline transactions related to business processes, such as accounts payable, claims processing and expense reporting. Stellent, based in Eden Prairie, Minn., will use Acorde with its Universal Content Management software,
which includes Web content management, document management, collaboration,
digital asset management and records management components.

Stellent offered $10 million in cash, roughly 4.1 million shares of Stellent common stock and has agreed to assume outstanding options from Optika, which specializes in imaging, business process management (BPM), collaboration and records management software.

Should the deal succeed, the former stockholders of Optika will own about 16 percent of the outstanding shares of Stellent common stock. Stellent shareholders will own approximately 84 percent of the combined entity.

In the short-term, Stellent plans to integrate the product lines via Web services. Longer-term plans call for the product lines to be integrated utilizing Stellent’s universal content repository.

Joshua Duhl, IDC’s research director for content technologies, said Stellent is already in a “unique and strong” position in this market because of the demand for its file conversion technology.

“With market consolidation proceeding at a rapid pace, this acquisition places Stellent in a comfortable position to compete” with such rivals as FileNet and Open Text, Duhl said.

Stellent President and CEO Bob Olson said during the call that he was
excited about the prospect for extending Stellent’s footprint across a greater number of companies. He also said he expects that purchase will make Stellent the most “complete ECM solution provider” in the market.

Optika currently has a customer base of more than 2,000 — more than
Stellent — including such marquee businesses as The Home Depot, Merrill Lynch, and Turner Broadcasting Systems. Stellent will have a total of 3,500 customers once the deal closes.

The ECM space has been red hot in the last several months, with players in the space seeing a pickup in its records retention software in light of the more stringent federal and government demands for saving files in the light of corporate accounting scandals.

Research firm IDC anticipates the market for new content management software licenses is expected to grow to $3.8 billion by 2007, while Meta Group sees the market topping $9 billion by the same year, due to the heightened concern for proper compliance and legal risk policies/procedures.

Regulations such as Sarbanes-Oxley have jumpstarted the consolidation. Storage vendor EMC moved to acquire Legato
and Documentum to shore up its information lifecycle management (ILM) strategy for managing content from its creation to its disposal.

Interwoven moved in on iManage in August, offering $171 million for the ECM player. Open Text followed with a bid to acquire
IXOS Software and IBM picked up Green Pastures in December.

Optika President and CEO Mark K. Ruport will join Stellent as an executive vice president, and Alan Menkes, a current Optika board member, will join Stellent’s board of directors.

Ruport said on the call that owing to the fact that customers want “more product from fewer vendors,” he realized the timing was right to take advantage of the market’s momentum and agree to the buy. “We thought we could go further together than alone.”

Stellent anticipates an annual revenue run rate for the combined entity of $100 million, and a cash and marketable securities position of approximately $70 million. The companies expect the transaction will close in April.

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