DCTM Background and Overview
Documentum (DCTM – $14.75, 7/29/99)
(This might be helpful to any new investors out there-PQ).
Company Description
Documentum started out as a company that offered a solution
to manage traditional documents and extended media
types (such as audio clips) in a client server environment.
Over time the company has developed a web based front
end and is extending its core functionality to include a
document repository that feeds content to web servers.
Documentum is also developing applications designed for
specific markets to solve specific issues instead of providing
a framework for their clients to solve the problems themselves.
Documentum currently has 570 of the Global 2000
companies as clients. The company was founded in 1990
and currently employs 600 people.
Key Investment Points
· Corporations with business critical documents such as FDS
filings or aircraft manuals need to track those documents,
including different versions, changes, and notations to those
documents as closely as manufacturers track inventory.
Documentum's enterprise document management system is designed
to handle the detailed library services, audit trail, security,
routing, control and distribution of documents that matter.
· Documentum entered into an agreement with IBM Global
solutions to remarket Documentum products as part of their
document management solution. Documentum is now on
the IBM price list and part of IBM training courses.
· Documentum is easing in the applications business to
complement its core server business. The company will
convert some of its DocSolutions into packaged applications
that can be marketed more easily as discrete products. Their
main purpose was to jump-start a document management
project by showing the customer something closer to a final
solution. The company's move into applications is a natural
evolution as it offers more value to customers by productizing
industry knowledge compiled via a vertically oriented
field organization.
· The company is in a transition period of moving from its
grass roots in document management into building higher
margin, knowledge based, industry specific, vertical
applications. These applications increase efficiency and
provide time to market opportunities for DCTM's clients
which translate directly into revenue.
Risks
· Although high-end database vendors do not have any
competing products currently, as the industry grows and
products become more similar, Documentum will likely be
seeing the shadows of industry giants such as Oracle and
Microsoft.
· The company has seen a pullback away from larger
contracts as companies batten down the hatches for Y2K.
The pipeline for Q2 looks more promising than the first two
quarters of the year but having the opportunity doesn't
necessarily translate into closing deals during these choppy
times.
· The company does not expect Y2K costs to be significant
but is in the identification phase associated with its
internal systems, operations infrastructure and suppliers.
Competitive Differentiation
· The company focuses on the high end of the market, targeting
companies that need multi site global implementations. DCTM's
solutions are focused on specific problems rather than
creating an infrastructure for moving documents from one
place to a repository. This translates into added value
for the customer.
· Documentum provides industry specific solutions called
DocSolutions. Vertical products include Retail Banking,
Engineering Change Notices and Process Manufacturing.
Market Overview/Competition
· The current competitive landscape consists of Filenet,
Open Text and PC Docs. Filenet focuses primarily on the
imaging market, Open Text is seen in deals focusing strictly
on web deployment and PC Docs focuses on document
management primarily in the Legal and Canadian markets.
Product Line Overview/Customer Base
Docpage Server – Document Management and Web Content
management tools
RightSite Server – Web Product
Clients – Workspace – full functionality on the client server
platform, Smartspace – supports basic document manage-ment
tasks, Viewspace – allows clients to view documents
in the Docbase
Documentum also provides integration between third party
software products such as SAPs R/3 (Doclink for SAP),
PeopleSoft, Lotus Notes(Unalink), AutoCAD and MicroS-tation(
Cadlink).
The company has recently announced three new web based
solutions:
ITeam – shipping at the end of March 99, ITeam will
manage project deliverables.
IQuality –manage production lines through a central re-
pository which will allow changes in procedure to be repli-
cated between plants real-time.
IMarketing – provides up to the minute information to a
company's salesforce with a heavy emphasis on ease of use.
Recent Events
The company announced quarterly results on July 22nd.
The company has revenues were still below last years rates
but better than we had anticipated. It's difficult to deter-
mine if the company has turned the corner yet but we will
be watching it closely as Y2K approaches. We don't expect
the company to produce an operating profit until the fourth
quarter at the earliest. In the mean time, there is $100M in
cash on the balance sheet and the company is in a better
position to weather a storm than many of its competitors.
(MSDW) |
