IBM Pays $1.6 Billion in Cash to Acquire FileNet; ECM Market Consolidates Further

Despite the recently announced acquisition of Hummingbird by Open Text, the enterprise content management (ECM) market increasingly is being dominated by some of the biggest names in enterprise computing — IBM, Microsoft, EMC, and Oracle.

Smaller players are having to look for buyers among the big four. If that option isn’t available to them, they look for combinations with similarly endangered companies in the space. That’s the grim dynamic that drove Hummingbird into the hands of erstwhile competitor Open Text.

It isn’t going to get easier for the smaller fish in the ECM pond.

News came today that IBM has announced the acquisition of FileNet in an all-cash transaction for $1.6 billion. In buying FileNet’s shares for $35 each, IBM will pay a premium of just one percent on the closing price of $34.65 per share Wednesday night. FileNet shares have experienced an appreciation in value of more than 25 percent during the past month, including a sharp gain after the company reported its latest quarterly results in late July, so perhaps a premium already was built into the share price.

Nonetheless, despite quarterly financial results that stunned market analysts by eclipsing earnings expectations, FileNet’s executives could read the writing on the wall. Good results in one quarter don’t necessarily portend an indefinite run of similarly positive news, especially when the industry’s bigger guns are trained on your space. It was time for a move, and IBM was there, cash in hand.

Who’s next? Well, Stellent, Interwoven, and Vignette are still out there, as are an array of even smaller companies. Of the three, Stellent has the best shot of enduring as an independent player, but it’s relative strength also might make it attractive to a player such as Microsoft. Joining Microsoft as a potential acquirer of a remaining ECM company is Oracle.