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10/24/2002
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Documentum Posts Profit, Foresees Growth

Nestlé deal helps content-management vendor end streak of six losing quarters.

Either Documentum Inc.'s third-quarter earnings are a sign that tech spending is starting to recover, or the vendor is taking advantage of its competition's woes to become the bully of the content-management market. On the heels of sizable quarterly losses reported by Vignette, Interwoven, and Stellent, Documentum rode a 46% increase in license revenue and an $11.5 million deal from Nestlé to its first quarterly profit since the fourth quarter of 2000.

CEO Dave DeWalt said during a conference call with analysts that he expects Documentum to build on that momentum. The company will get a boost from market adoption of Documentum 5, an updated version of its flagship software unveiled in September, as well as the closing of its acquisition of collaboration vendor eRoom Inc., announced earlier this month. But perhaps the most encouraging development is the rising demand in markets that haven't traditionally been Documentum's strength, including retail and government. In addition to a deal signed with an unidentified home-improvement retailer, Documentum added two federal agencies as customers--the Centers for Disease Control and the Office of Management and Budget.

Also important is the fact that once eRoom's technology is part of the product portfolio, Documentum will be able to offer integrated Web-content-management, records-management, document-management, digital-asset-management, and collaboration tools. "The more capabilities we can put in the same server, the more companies can say, 'Look, I can consolidate more of the spend I have out there,'" DeWalt said.

If there's any lingering doubt about Documentum's frontrunner status in the content-management market, consider this: DeWalt didn't sound all that concerned that he sees Microsoft approaching in the rear-view mirror. "Microsoft is in the radar screen, but not in the middle," he said. "We certainly want to keep an eye on them."

For the quarter ended Sept. 30, Documentum posted a profit of $2.0 million on revenue of $56.3 million, compared with a loss of $7.8 million on revenue of $45.3 million a year ago. Included in the revenue figure was $7.2 million from the Nestlé deal, with the remainder of that commitment to be spread among subsequent quarters. License revenue was $28.9 million, up from $19.8 million a year earlier, and Documentum posted five orders of more than $1 million. DeWalt said that two more million-dollar deals have been booked during the fourth quarter so far.

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