Open Text Corporation

views updated

Open Text Corporation

275 Frank Tompa Drive
Waterloo, Ontario N2L 0A1
Canada
Telephone: (519) 888-7111
Fax: (519) 888-0677
Web site: http://www.opentext.com

Public Company
Incorporated: 1991
Employees: 1,900
Sales: $414.8 million (2005)
Stock Exchanges: NASDAQ Toronto
Ticker Symbols: OTEX; OTC
NAIC: 511210 Software Publishers; 518210 Data Processing, Hosting, and Related Services; 541511 Custom Computer Programming Services; 541512 Computer Systems Design Services; 541519 Other Computer Related Services; 611420 Computer Training

Open Text Corporation is one of the leading providers of enterprise content management software and services in the world. The firm's flagship offering, Livelink, enables corporations, government agencies, and other organizations to securely manage, share, and store electronic documents as well as video, audio, and graphics files. Livelink, which can be purchased with many variations and add-ons, is used on more than 20 million computers by 13,000 clients in 114 countries. Open Text's revenues are derived from software licensing fees as well as customer support and other professional services.

BEGINNINGS

The origins of Open Text date to the mid-1980s, when an international project to create a computerized version of the massive Oxford English Dictionary (OED) was begun. Work on developing software that could search for specific words or phrases in the text was performed at the University of Waterloo in Ontario, Canada, starting in 1984, and completed in 1989.

Recognizing other potential uses for the program, Waterloo professors Frank Tompa, Timothy Bray, and Gaston Gonnet secured commercial rights and founded a company called Open Text to market it in June 1991, making their first product shipment in September. The following year saw the seven-employee company create a CD-ROM for the Canadian Pharmaceutical Association and reach an agreement with Nissho Iwai to distribute its products in Japan.

In 1993 Open Text shipped its first Windows-based applications to UBS of Switzerland and also began working with Infodata Systems on the EarthLaw environmental database, which boosted its presence in the United States. The company now employed 20 and had opened a second office in Vancouver, British Columbia. In addition to a search engine, Open Text also offered an online browser display module called LECTOR. Its products had been sold to more than 2,500 clients around the world.

In 1994 the Open Text 4 search engine was released, and the company began working with Booz-Allen and signed an agreement to perform services for Universal Document Management Systems. Customers now included Blue Cross/Blue Shield of Oregon, Caterpillar, General Dynamics, and Grolier Publishing, as well as the Ontario Legislative Assembly. The year 1994 also saw the company's board appoint a new management team, with Tom Jenkins named president and CEO.

In April 1995 the firm introduced the Open Text Index, a search tool that used automated "Web crawler" software to continuously index the Internet. Though the company had originally sought to supply its search engine to users of databases and other self-contained information resources, the emergence of the World Wide Web as a source of seemingly unlimited information gave Open Text and other companies like it a new opportunity. Unlike other software of its type, which omitted common words such as "and" and "the," the OED assignment had required that everything be indexed, which allowed users to search for specific phrases.

During 1995 the firm also raised CAD 25 million from investors, which helped fund the purchase of browser software from MKS, Inc. of Waterloo, as well as the assets of Intunix AG of Switzerland. In September Open Text also announced a deal to provide its web searching software to Yahoo! of Mountain View, California, where it would be used to complement that firm's own hierarchical index of Internet resources.

ACQUISITION OF LIVELINK IN FALL OF 1995

In November Open Text purchased a company called Odesta Systems Corp. of Northbrook, Illinois, for CAD 29.8 million. Odesta was developing software called Livelink, which allowed electronic documents to be accessed by multiple users over a company's internal network, called an intranet. The web-based program supported multiple file types and software programs. The company now employed 100, and in 1995 it recorded sales of $10.6 million, up from just $3 million in 1994.

In January 1996 Open Text went public on the NASDAQ with an offering of 4.6 million shares priced at $15 each, netting $61 million. By now the company was embroiled in a lawsuit filed by departed cofounder Gaston Gonnet, who was asking for $90 million and 391,000 shares of stock over his claim to own the Open Text 5 software.

Early 1996 also saw the company introduce its new Livelink Intranet software, early users of which included the Ford Motor Co. and Qualcomm, Inc. The introduction of Livelink came as the market for search engines was collapsing, and the company would soon make the document management product its primary offering. In the summer the firm also settled Gonnet's lawsuit with a payment of CAD 300,000 and release of the disputed shares of stock.

Acquisitions made during 1996 included software development companies Nirv Centre and InfoDesign; Softcore, a European reseller; and a stake in MiningCo.com, Inc. (later known as About.com). Alliances were formed with Siemens Nixdorf and web browser maker Netscape as well.

The year 1996 also saw Open Text initiate a restructuring which included layoffs of 12 percent of its 300-person workforce, the moving of its Web index office from California to Toronto, and closure of its Paris office. Competition was fierce in the development of new software products, and the firm had not turned a profit since going public. The company was continuing to sign up new clients, however, including Thomson Corporation and the U.S. Government Printing Office, which would use its software to index government documents.

COMPANY PERSPECTIVES

Open Text is the market leader in providing Enterprise Content Management (ECM) solutions that bring together people, processes and information. Our software seamlessly combines collaboration with content management, transforming information into knowledge that provides the foundation for innovation, compliance and accelerated growth.

Our legacy of innovation began in 1991 with the successful deployment of the world's first search engine technology for the Internet. Today, Open Text supports 20 million seats across 13,000 deployments in 114 countries and 12 languages worldwide.

As a publicly traded company, Open Text manages and maximizes its resources and relationships to ensure the success of great minds working together.

In early 1997 an International Data Corp. survey ranked Open Text the world leader in web-enabled electronic document management software, with 64 percent of the market. June saw Netscape Communications Corp. begin bundling Livelink with a product called SuiteSpot, while the firm named former Oracle Corp. vice-president Brett Newbold to the title of president, with Jenkins remaining CEO. For the fiscal year ended June 30, 1997, the company recorded $22.6 million in revenues and a net loss of $13.2 million.

In October 1997 Open Text paid $6.7 million to buy On Time client-server scheduling software maker Campbell Services, and the following January launched Livelink Online, a subscription service in which the company hosted other firms' documents. That month the firm recorded its first quarterly operating profit as a public company.

Open Text now had a total of 18 offices around the world and was focusing on expansion in Europe, where it had a presence in the Netherlands, Switzerland, and the United Kingdom. Eighteen percent of sales came from that continent and 1 percent from Asia, with the bulk taking place in North America.

In early 1998 the firm signed its biggest contract to date with the Ford Motor Co., where 135,000 workers would use Livelink. It followed on the heels of a 60,000-worker contract with Motorola. The company's clients paid about $100 per user, with various packages available so that some could have full access and others "read-only" access to documents in a Livelink system, with easy upgrades available at additional cost. The software was particularly useful for large multinational firms that had staff in far-flung locations working on projects together.

News of the company's new contract with Ford helped boost its stock price to more than $20 from a recent low of $5, and in March Open Text issued special warrants for 1.75 million new shares to Canadian institutional investors to raise $35 million. The same month saw the firm introduce a new business-friendly search engine, Livelink Pinstripe.

INFORMATION DIMENSIONS PURCHASED IN SUMMER OF 1998

In June Open Text acquired Information Dimensions, Inc. of Dublin, Ohio. That firm, which employed 170 and had revenues of $20 million, was considered the company's closest competitor after market leader Documentum, Inc. of California. After the sale Open Text would draw even with the latter, employing 570 and selling its products in 31 countries.

Results for the fiscal year ended in June (when the firm's shares had also begun trading on the Toronto Stock Exchange) showed revenues doubling to $45.3 million, with a loss of $23.5 million largely due to the $18.4 million spent to acquire Information Dimensions. Livelink was now being used at 2.5 million "seats," the industry term for individual users.

In October Open Text appointed John Shackleton to take over the president's role from Brett Newbold, and in late November the company made an offer to buy PC Docs Group International, Inc. The latter firm offered a similar product to Livelink that was installed at one million seats, which analysts cited as the primary reason Open Text was seeking the acquisition. The $162 million proposal was rejected as a "Grinch-like stunt" by PC Docs, however, and the offer was later retracted. Soon afterwards Open Text bought the assets of bankrupt document management firm Lava Systems, Inc. and introduced MyLivelink, which would serve as a web search engine for companies' internal web-based documents.

In April 1999 the firm, whose stock had doubled in price since December, sold two million additional stock warrants for $34 each to investment dealers, and then offered CAD 235.5 million in cash to buy PC Docs, which had tentatively accepted a lower offer from Hummingbird Communications Ltd. The latter firm subsequently boosted its offer, however, and Open Text withdrew. Not long afterwards the company acquired MicroStar Software, Ltd. for approximately $7 million, and bought a 15 percent stake in Communities.com, which operated chat rooms where users could share video, audio, or text.

KEY DATES

1991:: Open Text is founded in Waterloo, Ontario, to produce search engine.
1995:: Livelink document management software maker Odesta is acquired.
1996:: Initial public offering brings firm $61 million.
1998:: Information Dimensions acquisition boosts employment to more than 570.
2002:: Centrinity purchase adds FirstClass voice mail, email, fax integration software.
2004:: Merger with Ixos Software AG of Germany doubles company's size.
2005:: Firm cuts 15 percent of workforce, closes offices; Artesia is acquired.

In early 2000 Open Text created a new unit to operate a web site through which companies could exchange documents and perform transactions. The firm also began to offer Livelink through application service providers including British Telecom and KPNQwest, which enabled smaller companies to lease the software rather than buy it. For the year ending in June 2000, Open Text reported revenues of $112.9 million and a profit of $25.1 million.

The year 2000 had also seen the company form an alliance with BlackBerry maker Research In Motion and acquire Bluebird Systems of California and part of LeadingSide, Inc. of Massachusetts. According to some observers, small acquisitions such as these were primarily made to obtain new employees. Finding talented workers had become difficult, and in 2001 Open Text launched a recruiting effort that sought to add 400 new employees to its staff of 1,100.

After the September 11, 2001 terrorist attacks on the United States caused business travel to plummet, the firm's software became even more attractive to companies with geographically dispersed units, and despite the worsening North American economy Open Text's sales remained strong. The firm also began ramping up development of secure document storage and viewing options for new clients that included U.S. government agencies, and it subsequently won certification from the U.S. Department of Defense for its secure software. Over the next several years a newly formed government operations division would grow to produce more than 10 percent of revenues.

In December Open Text bid $68.5 million for electronic form producer Accelio Corp., which had 8.5 million users, but that firm's board voted unanimously to reject the offer. Accelio was later purchased by Adobe Systems, Inc. for a much higher figure, while Open Text, which had acquired an 18 percent stake, made a substantial profit.

In 2002 the firm paid $30 million to acquire Centrinity, Inc., whose First Class Communications Platform gave integrated access to voice mail, email, and fax content for educational and business users. The Livelink software suite was also in the process of being upgraded, and recently added options included Records Management 2.0 and Livelink MeetingZone 2.0, which enhanced physical records management and online conferences, respectively. Installations of Open Text's flagship product, now available in the improved version 9.1, reached six million seats during the year.

Acquisitions continued in 2003 with business-communications software maker Eloquent, Inc. of California, web portal software company Corechange, Inc. of Massachusetts, and Web content management software maker Gauss Interprise AG of Germany.

IXOS ACQUISITION DOUBLES FIRM'S SIZE IN 2004

Open Text's largest purchase to date came in October 2003 when a $230 million deal was reached to buy Ixos Software AG of Germany, a document management and email archiving technology firm. The adoption of the Sarbanes-Oxley Act in the United States had made archiving of emails a necessity for corporations, while also increasing the complexity of record-keeping. After the sale closed in early 2004 it doubled the size of the company to 2,000 employees, though 130 Ixos workers were let go. The merged firms would have total revenues of $375 million.

The summer of 2004 saw Open Text form an alliance with Siemens AG of Germany to provide consulting and support services in Europe. The company also paid $24 million to buy Quest Software, Inc.'s Vista Plus software management and storage product line during the year.

In July 2005 President John Shackleton took over as CEO from Tom Jenkins, who would continue to serve as chairman. The firm subsequently announced a restructuring that included layoffs of 15 percent of its workforce of 2,200 and the closing of 27 offices, which was expected to save CAD 40 million per year. Some operations would be consolidated, with primary business locations continuing to be Ontario, Chicago, and Munich, Germany. According to several observers Open Text was having trouble combining its operations with Ixos, though the firm itself cited slowdowns in Europe and Japan, currency price fluctuations, and delays in completing several major transactions.

In August the company bought Artesia Technologies, Inc. of Maryland, which made software to manage large digital video, audio, and graphics files. Several months later Open Text announced that Microsoft would offer Artesia as an option in its SQL Server 2005 database platform, and the program was later purchased for use by the National Collegiate Athletics Association.

Fall also saw Open Text move into a new headquarters facility in the University of Waterloo Research and Technology Park, on a street named Frank Tompa Drive in honor of one of the company's founders. Sales for the year totaled $414.8 million, with a profit of $20.4 million recorded. Revenue from software licenses accounted for $136.5 million, customer support $179.2 million, and service $99.1 million.

Open Text, which had recently bought back one million shares of its stock, now had no debt and a war chest of more than $80 million. Its software products were installed in some 20 million seats in 114 countries around the world. Expansion was continuing, and early 2006 saw the company form an alliance with European technology consulting giant Atos Origin to market Livelink.

In 15 years Open Text Corporation had grown into one of the top makers of electronic content manage-ment software in the world, taking in nearly half a billion dollars a year from a category that did not exist when it was formed. The company's products were essential tools for organizations that required multi-user access and secure storage of a wide range of electronic file types.

PRINCIPAL SUBSIDIARIES

Open Text, Inc. (U.S.); Artesia Technologies, Inc. (U. S.); Open Text Eloquent, Inc. (U.S.); Open Text GmbH (Germany); Ixos Software AG (Germany); Gauss Interprise AG (Germany).