A Canadian technology firm based in Waterloo, Ontario, continues an impressive run, with quarterly results showing revenue up 20.2% over the same period last year, beating analyst estimates for both revenue and profit.
The company consistently performs well in an industry dominated by a handful of much larger competitors, some of which have been rumored to be eying it as a potential acquisition. A new CEO took the reigns in January after the longtime company leader, who grew the company from a $100-million-a-year business to over $1billion in annual revenue, retired.
If this sounds more than vaguely familiar, take a breath. We’re not talking about telecommunications company Research In Motion (NASDAQ:RIMM). This is OpenText (NASDAQ:OTEX), one of the world’s largest “enterprise content management” (ECM) providers. Only IBM (NYSE:IBM) and CA Technologies (NASDAQ:CA) are bigger when it comes to solutions for managing electronic documents and digital assets.
OpenText is currently Canada’s largest software company, employing almost 4,500 people. Incorporated in 1991, the company got its start selling search engine technology and Web-based document management. Through a series of acquisitions, OpenText has expanded into products supporting team collaboration, social media, and digital asset management. While RIM is only blocks away from OpenText and both have roots at nearby University of Waterloo, the prospects for the two Canadian technology heavyweights couldn’t be more different.
Ripe for takeover?
OpenText’s new president and CEO, Mark Barrenechea, took over in January, after resigning from the same role at Silicon Graphics (NASDAQ:SGI). He also held senior roles at CA, as executive vice president and chief technology officer. OpenText reported quarterly profits of $47.4 million (up from $37.1 million the previous year) on revenue of $321.5 million (compared to $267.5 million).
While OpenText seldom basks in the software or technology spotlight, investors have taken note of the fact that one of the company’s competitors—UK-based Autonomy— was bought by Hewlett-Packard (NYSE:HPQ) in a $10 billion deal last year. In a Globe and Mail article published at the time of the Autonomy deal, it was noted that if the same pricing model used by HP in its blockbuster deal were applied to OpenText, the company’s shares would be worth between $127 and $159. Last week they were trading at $60. As the largest remaining independent ECM provider, OpenText could be a takeover target for larger companies such as IBM, SAP (NYSE:SAP), Oracle (NASDAQ:ORCL), or even Microsoft (NASDAQ:MSFT) as those companies look to supplement their own products and gain a dominant position in enterprise content management.
With a history of solid growth, a penchant for beating analyst expectations, a new and experienced CEO, shares priced nearly $11 under the $70 they were selling for in August, and technology that could make it a valuable acquisition for one of the industry giants, OpenText has a lot to offer investors.
