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A Tale Of Two Vendors


First-quarter earnings for content-management vendors Documentum and Interwoven indicate contrasting success in weathering the software-industry slowdown.

By Tony Kontzer
InformationWeek
April 19, 2002 12:00 AM

Documentum and Interwoven are partners seemingly headed in opposite directions. On Thursday, the two content-management vendors both posted losses, but that's where the similarities end. A closer look reveals Documentum is bucking the downward spiral of the software industry, while Interwoven is a symbol of the sector's woes. At Documentum, revenue is nearly 12% ahead of last year's pace, software licenses are up 21%, average deal size is up 29%, and the company is closing in on a return to profitability. Interwoven's revenue is down 46% from last year, software licenses are down 61%, average deal size is off 5%, and profitability isn't within reach.

To his credit, Interwoven CEO Martin Brauns didn't candy-coat his company's financial showing during a conference call with analysts. Brauns said he's disappointed in the company's performance, even if many other software companies are undergoing similarly tough times. In fact, when asked how he thinks the launch next week of collaborative applications for managing documents, portal content, and Web apps will affect the current quarter, Brauns was surprisingly candid. "We're assuming no measurable improvement," he said. Brauns also said that the sharp drop-off in software-license revenue is tied to the company's commitment to its system integration partners as a developing sales channel.

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Meanwhile, Documentum's earnings call was comparatively rosy, with analysts applauding the company's performance in a difficult environment. The company signed 68 new customers during the quarter and posted a 90% renewal rate. Better yet, CEO David DeWalt said the future looks good, too, with the possibility that Documentum will break even for the current quarter. "The pipeline's much more significant coming into Q2 than Q1," DeWalt said. He identified several areas in which Documentum has opportunities for growth, including vertical-industry portals and government. The company has specifically added features such as Section 508 compliance for disabled users, antivirus tools and HIPAA compliance, all of which are expected to help increase government sales.

For the quarter ended March 31, Documentum posted a loss of $1.7 million on revenue of $50.6 million, compared with a loss of $14.7 million on revenue of $45.3 million last year. Average deal size climbed to $306,000 from $238,000 a year ago. Interwoven posted a loss of $15.7 million on revenue of $32.7 million, compared with a loss of $24.3 million on revenue of $60.5 million last year. Software-license revenue was $14.9 million, down from $39.0 million a year earlier, and deal size shrunk to $210,000 from $220,000.


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