OpenText CEO: Company’s ‘On Track’ with Recent Acquisitions, Making AI Strides

OpenText is “on track” with its plans for the three key acquisitions that it made over the past eight months and is also making strides with its Magellan artificial intelligence (AI) platform, according to CEO and CTO Mark Barrenechea.

The enterprise information management (EIM) software firm bought Dell EMC’s Enterprise Content Division (ECD), including Documentum, early this year. OpenText then purchased Covisint and that company’s cloud platform for building identity, automotive and Internet of Things (IoT) applications, as well as forensic security vendor Guidance Software.

OpenText is “on target for revenues, margins, integration and customer success” with ECD and “the team is executing well to our internal business plans,” Barrenechea said Nov. 2 on an earnings call with analysts for the company’s first quarter (ended Sept. 30). As an example, OpenText “expanded ECD’s margin profile” from 13% to 25% since the purchase, he said. Over the next 90 days, OpenText expects to “complete the vast majority of integration activities” related to ECD, he told analysts.

OpenText closed the Covisint acquisition July 26 for about $71 million, he said, adding: “Covisint customers are more confident in their purchasing decisions now that they’re part of OpenText.” The company continues to expect Covisint will “begin to be accretive to earnings” in the second half of this fiscal year, he said. After owning Covisint for just 90 days in Q1, OpenText already “completed the majority of our restructuring,” he said, adding that “key [customer] wins” it’s already achieved as a result of the purchase included Cisco and General Motors in Q1.

OpenText went on to close the Guidance Software acquisition Sept. 14 for about $221, he said. That purchase “strengthens our leadership position in electronic discovery and opens up a new market in information security,” he told analysts. Noting that OpenText only owned Guidance for two weeks in Q1, he said it 
“had no significant revenue impact” yet. But he said: “We’ll have Guidance Software in our target model within the first 12 months of operations. Initial engagement with customers, employees, resellers and partners has been extremely positive, and we’ll provide more updates on our next call.”

In AI, Gallo Winery selected OpenText Magellan as the wine maker “looks to better understand their customers and further optimize their manufacturing and purchasing decisions,” he said.

OpenText reported Q1 revenue jumped 30.3% from a year ago, to $640.7 million. Of that, cloud services and subscriptions revenue increased 14.2% to $193.9 million. But profit fell to $36.7 million from $912.9 million.

“The company beat our revenue estimate,” MUFG Securities Americas analyst Stephen Bersey said in a research note Nov. 3. OpenText, via its acquisition strategy and targeted research and development, has “aligned itself with fast-growing end markets and is growing its top line solidly as a result,” he said, adding: “We expect the company will continue to make prudent acquisitions, opportunistically, that complement its vast … portfolio.”

Mergers and acquisitions continue to be OpenText’s “leading growth driver,” Barrenechea also said on the call. The company entered fiscal 2018 “well-aligned to market and customer demand drivers, and we’re at the beginning of a new product cycle,” he said.

OpenText customers are “responding well to our expanded” EIM offerings that now include advance capabilities for AI, Internet of Things (IoT), and information forensics and security, he said in the company’s earnings news release, adding: OpenText was “well positioned to be the leading Digital platform for the world’s leading companies, both on-premise and in the Cloud.”