Demand for its enterprise content management software drove a 57% gain in OpenText's second-quarter earnings, enabling the $182 million purchase of the business process management firm.
Based on increased demand for its enterprise content management (ECM) software, OpenText was able to beat analysts' estimates, increasing its second-quarter earnings by 57%, and enabling the developer to acquire Metastorm for $182 million in cash.
On Wednesday, OpenText announced it had entered into an agreement to merge Metastorm, the Baltimore-based provider of business process management, business process analysis, and enterprise architecture software, with a subsidiary of OpenText.
"Metastorm will add complementary technology and expertise that enhances our ECM solutions portfolio," said John Shackleton, OpenText's president and CEO in statement. "We look forward to welcoming its employees and customers to OpenText."
The transaction is expected to close in OpenText's third quarter, ending March 31, and is subject to customary approvals and the consent of Metastorm's stockholders.
"Combined with OpenText, Metastorm will be able to provide a broader and deeper range of offerings to our customers, while leveraging the strength and stability that comes with being part of a larger global organization," said Robert Farrell, chairman and CEO of Metastorm.
And, based on unaudited results of its most recent quarter -- ended Dec. 31, 2010 -- OpenText continues to expand into a larger business. The Canadian company, which reports its financials in U.S. dollars, earned $37.1 million, or 64 cents per share, during the quarter compared with $21.2 million, or 37 cents per share a year ago.
Total revenue for the second quarter of fiscal 2011 was $267.5 million, up 7.9% compared to $247.8 million for the same period in 2010, OpenText said. License revenue for the second quarter of fiscal 2011 was $79.2 million, up 8.9% compared with $72.7 million in the year-ago timeframe, the company reported.
Adjusted net income for the second quarter of fiscal 2011 was $70.5 million or $1.21 per share on a diluted basis, up 41% vs. $50.1 million or $0.87 per share on a diluted basis for the same period a year ago. Operating cash flow in the second quarter of fiscal 2011 was $40 million; in 2010, it was $32.5 million.
"We had an excellent quarter. With license sales rebounding, our sales groups are performing well in all regions," said Shackleton. "We are encouraged by the level of demand for our compliance-based solutions, especially in the financial services and energy verticals, and I am confident that we are on track to meet our targets for the fiscal year."
Healthcare, banking, public sector, and insurance are those verticals most likely to invest in document and records management, according to Datamonitor. Total software revenue in the enterprise content management market is expected to grow at a compound annual rate of 10.1% through 2014, Gartner predicted, with worldwide ECM software sales exceeding $5.7 billion by 2014.