EMC to Buy Xerox Spinoff for $85M

EMC announced today that it will spend an estimated $85 million in cash to buy publicly held Document Sciences Corp., an ISV partner of EMC's that specializes in the creation and management of customized documents for more than 500 organizations, many in financial services.

The deal is expected to close in the first quarter of 2008 and probably won't have an impact on EMC's financial results until 2009.

EMC will make Document Sciences a separate business unit within its Content Management and Archiving division, which supports Documentum, Captiva, ApplicationXtender, and EmailXtender and is headed by Mark Lewis. EMC will retain the 500 employees of Document Sciences in Carlsbad, Calif., as well as more than 300 employees of Document Sciences's China subsidiary, Objectiva. Current Document Sciences CEO Jack McGannon will stay on to lead the new EMC unit.

EMC calls Document Sciences's specialty "document output management" (DOM) software -- something Mark Lewis says will flesh out EMC's ability to offer "high-value transactional content management (TCM) solutions." Specifically, Document Sciences' xPression product line enables companies to create and generate documents in what Lewis calls "transaction-intensive applications, such as loan origination, new account enrollment, wealth management, brokerage, and claims processing."

The level of customization and automation offered by Document Sciences isn't currently part of EMC's Documentum lineup, which is why EMC has been partnering with the company for the last several years. Indeed, EMC awarded Document Sciences the "Documentum Partner of the Year Award" in 2005.Document Sciences has about 100 other business and channel partners, including Xerox, the company that formed Document Sciences in 1992. Over the years, Document Sciences worked toward independence from Xerox. It paid Xerox $2.7 million in November 2003 to buy back more than 700,000 shares of stock Xerox still owned.

Document Sciences still relies on Xerox, however, as noted in the company's quarterly financial statement on September 30, 2007: "We currently have a variety of contractual and informal relationships with Xerox and affiliates of Xerox, including a cooperative marketing agreement, a transfer and license agreement and various distribution agreements." For the nine months ended September 30, Document Sciences relied on Xerox and Xerox affiliates for 9 percent of its total $30 million in revenues, amounting to $2.7 million.

That revenue attributed to Xerox outstrips the amount Document Sciences makes on some international sales. For the nine months ended September 30, 2007, the company earned $1.5 million from sales in China, Australia, New Zealand, and Latin America.

One analyst thinks it's wise not to underestimate EMC's judgment when it comes to acquisitions. "EMC has made some brilliant decisions; look at VMware, for heaven's sake," says Arun Taneja of the Taneja Group consultancy. In his view, the growing dominance of disk storage and mandates in regulatory compliance are pushing companies toward use of ICM (intelligent content management). And ICM was one of the reasons EMC gave for buying Documentum in 2003.Have a comment on this story? Please click "Discuss" below. If you'd like to contact Byte and Switch's editors directly, send us a message.