Documentum Inc. provided the most compelling evidence yet of the increasingly tight relationship between content management and collaboration Thursday when it said it will acquire collaboration vendor eRoom Technology Inc. in a deal valued at nearly $120 million. Documentum, whose stock tumbled 10.3% Thursday to $11.35, before the deal was announced, will issue 9.4 million shares of stock to eRoom shareholders and pay $12.6 million in cash.

The deal, expected to close before year's end, brings together two of the strongest players in their respective fields, creating a company that figures to take the lead in collaborative content management. Documentum in recent years has made the transition from providing dense document-management systems for pharmaceutical and manufacturing companies into the emerging area of enterprise content management. In July, the company unveiled plans to release tools that would let customers more easily deploy collaboration capabilities in their content-management systems.

Collaboration vendors such as eRoom have been seeing a need to tie into content-management systems in order to handle the growing volume of documents and messaging threads that are considered valuable enough to archive. To that end, eRoom had been working on an integration package that would let customers tie its digital workplace technology into their Documentum systems.

In a conference call announcing the deal, Documentum CEO Dave DeWalt said content management and collaboration both have become an increasing part of enterprise applications such as ERP and customer-relationship management, as well as other business tools such as portals. DeWalt expects the addition of eRoom to result in deployments with larger numbers of seats and users. He says eRoom will continue to operate independently as Documentum's collaboration division, and no immediate plans for staff reductions were revealed. The companies will work on an integrated collaborative content-management offering, but no specific release date was offered.

Documentum also said it would beat estimates for the third quarter ended Sept. 30, with expected revenue of $55 million to $56 million and a profit of 3 or 4 cents a share.