Autonomy Acquires Enterprise Search Vendor Verity

Under terms of the agreement, Autonomy, based in Cambridge, England, will pay Verity stockholders $13.50 a share, or about $500 million. The all-cash transaction requires approval from shareholders and regulators. The deal is expected to close by early 2006.

Verity, based in Sunnyvale, Calif., has 554 employees and annual revenues of $143.5 million.

Both companies sell software for categorizing, indexing and finding information in repositories scattered across a corporate network. Besides information stored in databases, the technologies also retrieve unstructured data found in emails, electronic forms, Word documents, PowerPoint presentations and more.

While the combined software is expected to improve Autonomy's product line, the acquiring company is also expected to see benefits in its business operations, Verity spokesman Derek van Bronkhorst said.

About 70 percent of Autonomy's sales are through the channel, while the remainder is direct, van Bronkhorst said. Verity is the opposite, so the company is expected to add a stronger sales force to Autonomy.

In addition, Verity is stronger in the United States, and it brings a better professional services organization.

"The combination of the two companies creates a larger, stronger organization with a wider global reach, and it enhances the combined organization's ability to meet growing customer demand," van Bronkhorst said.

As to a product roadmap, none is available yet. "It's too soon," the spokesman said.

Robert Lerner, analyst for Current Analysis, said multi-billion-dollar companies like Google Inc., Yahoo Inc., Microsoft Corp. and IBM are slowly encroaching on the enterprise search market, giving small vendors like Autonomy and Verity little choice but to merge.

"The best thing they can do is to combine forces," Lerner said. "They're small companies that could find themselves up against a wall if the bigger companies come in and make a difference in the market."

The acquisition is sure to increase the pressure on small companies, such as Convera, Lerner said.

"It's going to be a little harder for them in the market," he said.