Open Text to buy German rival

Waterloo, Ontario-based Open Text, a vendor of applications used to build corporate intranets, said it expects the deal to close before the end of its second fiscal quarter, ending Dec. 2003, pending shareholder approval. Open Text executives said during a conference call that they have already garnered approval from 73 percent of Gauss' shareholders. German market regulations call for 75 percent to make the deal official.

Content management applications are used by companies that develop corporate intranets--central networks that are designed to share information. Open Text and Gauss specialize in software tools that offer collaboration, document management, scheduling and intranet search functionality.

If the acquisition is approved, executives said, Gauss will merge with an Open Text subsidiary that focuses on content management, in particular the market for integrated document and output management (IDOM) software. Open Text Chief Executive Tom Jenkins said his company will merge its own IDOM products with the newly acquired holdings while maintaining Gauss' product lines, including the German company's upcoming VIP 8.2 content and portal management software release.

"Taken together, the culmination of both companies represents the leading content management suite on the market today," Jenkins said. "Vendors with a global presence are better served to meet the demands of customers with a global presence."

Among the customers Gauss brings to the combined company are BMW, USA Today and Korean Air. Open Text customers include Deutsche Bank, Genzyme and Nortel Networks.

"By joining with Open Text we can offer new applications, support and services to our customers," Ron Vangell, chief executive of Gauss, said in a statement. "It is clearly the right move for both companies to position us for future growth in a sector of the software market that is changing rapidly."

Jenkins declined to comment on whether the merger would affect employee numbers at either company, but he said Gauss had already undertaken cost-reducing measures this year that will help ease the merger.

Industry analysts said the deal should serve as a significant step forward for Open Text, as it moves further from its roots in knowledge management into enterprise content management. Julie Rahal, an analyst for Framingham, Mass.-based IDC, said the major benefit for Open Text, which she ranks just below the top 10 content management vendors, is the addition of Gauss' technology.

"Industry consolidation continues to play out in the content management space, and this deal strikes me as similar to the Interwoven buyout of iManage," Rahal said. "The addition of Gauss' Web and document management tools should go a long way in filling out Open Text's range of products."

Rahal said it will be crucial for Open Text to integrate Gauss' technology, as customers are increasingly looking for tightly knit products from content management vendors.

"Separate products won't get as much traction," she said.