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Technology Stocks : Open Text
OTEX 34.56-3.9%Nov 7 9:30 AM EST
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To: Rob D. who wrote (643)12/5/1997 3:08:00 PM
From: Sirius Pointer  Read Replies (1) of 1195
 
It seems that the acquisition has a minor negative impact in the short term, but a minor positive impact in the long term. Some observations:

* In the press release, Jenkins said "begins our strategy of rapid growth through well-thought-out acquisitions,". So there will be more acquisitions to come. It's a good idea to expand rapidly through strategic acquisitions providing the products can be well integrated. I wonder if its Canadian location has any impact on keeping key personnel.

* Adding scheduling to LiveLink sounds a logical extension. It's not hard to add scheduling components to the LiveLink. But it's a better idea to acquire a company with some big-name customers.

* The combined company did 34M in the last 4 quarters. With OpenText making 26.3M, OnTime had about 7.7M revenue in the last 4Q. My guess is that OnTime is losing about 2~3M annually. There will probably be some employees leaving the company after consolidation. So the net impact after two quarters is minimum.

* 6.7M cash is translated into about 1~2 cents loss of annual interest income .

The acquisition looks positive in the long run from the perspective of products. But it looks negative in the short term from financial perspective especially since OpenText achieved better than expected earnings by holding flat spending in last quarter.
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