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Documentum Acquires eRoom, Says Earnings On Target

Documentum on Thursday signed an agreement to acquire collaboration software vendor eRoom Technology in a cash-and-stock transaction valued at more than $100 million.

Documentum eRoom Technology

The acquisition, slated to close in December, cements a technology relationship the two enterprise software vendors announced in July with the release of the Documentum Collaboration Edition.

Documentum executives also said third-quarter earnings and sales would be at the high end of its earlier guidance. The company will report earnings of between 3 cents and 4 cents a share on revenue of between $55 million and $56 million when it releases it financials on Oct. 24, according to CFO Mark Garrett.

Garrett said eRoom, which is profitable and on a run rate of about $9 million to $9.5 million in sales per quarter, will have a positive impact on Documentum's sales and earnings in 2003, even prior to considering any synergies between to the two companies.

Documentum agreed to pay $12.6 million in cash and about 7.7 million shares of its stock for eRoom. ERoom shareholders will also receive options for 1.7 million additional shares of Documentum stock.

"This is a very natural union," said Dave DeWalt, chairman and CEO of Documentum, Pleasanton. He said collaboration software is a hot market segment and a pervasive technology that complements nearly every content management application. "We see a lot of cross-selling and upselling opportunities," he said.

While combining sales channels and integrating products, eRoom, Cambridge, Mass., will also continue to operate as a separate entity headed by its current president and CEO, Jeffrey Beir. And the eRoom brand will be maintained.

"Our model is complementary to Documentum's," Beir said. "The power of eRoom is we can start with smaller transactions and over time we see a very high repeat rate as we penetrate further into the customer account."

Over the past several months, a number of content management vendors have been adding collaboration capabilities to their offerings. Beir said the merger will enable eRoom to compete more effectively. "We have a much broader offering now," Beir said.

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