The words "cloud" and "oxygen" pop up a lot in references to
OpenText, even though the firm has nothing to do with
parachuting, mountain climbing or any other high-altitude
endeavors where oxygen is thin and the clouds are at your
) designs and sells enterprise information management (
) software and solutions to corporate and government clients.
Its products are geared to help organizations manage, secure
and leverage their unstructured business information. The company
boasts more than 50,000 customers worldwide.
In OpenText's case, the "cloud" refers to its recent
initiatives to expand its presence in cloud computing, in which
applications are accessed over the Internet instead of sitting on
a hard drive. OpenText's biggest move in this area came in
January, when it closed a $1.07 billion buyout of GXS Group, a
provider of cloud-based business-to-business integration services
and managed services.
Meanwhile, "oxygen" refers to OpenText's Red Oxygen project,
which packages many software products into a single platform.
Red Oxygen is designed to bring a higher level of integration
across OpenText's EIM products. In November the company
identified five Project Red Oxygen product suites.
The Content Suite's products assist in areas such as
information governance, workflow, search and archiving. The
Process Suite helps automate complex and simple business
processes -- provisioning services to employees, for example.
OpenText's Experience Suite includes tools for collaboration,
tailoring the company intranet for users and managing digital
assets, among other features. The Information Exchange Suite has
to do with things like mail, other messaging and notifications.
And the Discovery Suite involves search and content
Cachet Of The Cloud
The suites are built to help clients manage content, automate
complex processes, improve brand management and derive value from
content trapped in "silos," or information management systems
that can't communicate with other systems.
These initiatives are part of OpenText's desire to build the
world's largest enterprise business-to-business, or B2B, network,
as CEO Mark Barrenechea said during a fiscal 2014 third-quarter
conference call last month.
"We intend to achieve this by adding new services, more
vertical applications and growing our trading partners,"
Barrenechea said. "B2B integration is a critical technology for
the enterprise in EIM."
An important element of OpenText's growth plan is a bigger
footprint in cloud technology.
Providing EIM solutions via the cloud offers customers "the
flexibility to place workloads where they need to around the
globe and in the data zone they find important to them,"
Barrenechea said. "Continuing to scale our cloud services is a
A couple years ago OpenText had no cloud-related revenue. But
during the company's fiscal third quarter, which ended in March,
the Cloud Services unit delivered $128.4 million in revenue. That
was up from $43.2 million a year earlier and represented about
29% of overall revenue. GXS contributed $88.2 million of Cloud
Services revenue during the quarter.
By comparison, OpenText's core Software License business
contributed $73.1 million in Q3 revenue.
OpenText posted overall revenue of $442.8 million for the
quarter, up 31% from a year earlier but below consensus estimates
for $447 million. Earnings climbed 33% to 84 cents a share,
topping views for 80 cents.
Regionally, the Americas contributed 54% of revenue,
Europe/Middle East/Africa contributed 36%, and Asia-Pacific
Analysts polled by Thomson Reuters expect OpenText to grow
full-year earnings 16% this fiscal year and 15% in fiscal 2015.
Its shares trade near 48.
OpenText looks to expand both its customer base and geographic
footprint in coming quarters as a way of growing new-product
sales, says Ralph Garcea, analyst at Global Maxfin Capital.
"The company intends to establish a wider and deeper
distribution network that includes a direct selling organization,
inside sales, system integrators, agencies, OEMs (original
equipment manufacturers) and (value added resellers)," he
OpenText has made progress in its "established" European and
North American businesses, Garcea says.
"But there are further opportunities in growth markets such as
Latin America, China, India, Southeast Asia, Japan, South Africa
and the Middle East, as well as Eastern Europe," Garcea said.
"The company has identified over 3,000 key target accounts."
OpenText recently announced the opening of a new office in Sao
Paulo, Brazil, to support its Latin America business operations.
The office will serve as OpenText's South American hub.
OpenText also increased its workforce there and opened a new
satellite office in the capital city of Brasilia to further
expand its footprint in the region.
"With a diversifying technology landscape and increasing
Internet penetration, Brazil is in the midst of a technology boom
which creates huge opportunity for businesses," Barrenechea said
in a statement. "By strengthening our presence in Latin America,
we are now able to provide local organizations with solutions
tailored to their specific needs."
OpenText faces competition from a variety of different
companies, including tech giants such asEMC (
) andOracle (
Of those three, however, only Oracle is part of IBD's Computer
Software-Database industry group, where OpenText resides. The
largest companies in it by market cap are Oracle, then OpenText
andSplunk (SPLK). Companies in the group that are currently
highly rated by IBD includeNetScout Systems (NTCT) and
In a recent interview with IBD, Barrenechea said one of his
company's competitive strengths is its ability to find the right
employees and give them free rein to pitch ideas and share
"I've seen cultures where leaders tell you what to do," he
said. "We have a culture built on asking the right questions.
Ninety-nine percent of our workforce has a bachelor's degree. I
treat it as a learned organization."