Documentum / IIG / ECD? – EMC Announces 2014 Earnings, Layoffs and thoughts on a spin-off

EMC released it’s 2014 financial results yesterday.   Included with the announcements was news of layoffs for 2015.  In a separate discussion at an IIG partner kickoff, IIG – the Information Intelligence Group, is changing it’s name to Enterprise Content Division – ECD as well as it’s leader.   This post will present thoughts on all of these changes.

EMC IIG changed to EMC ECD – can we just stick to Documentum?

The combination of Captiva, InfoArchive, Documentum and other products do need to be grouped together and we love the idea of Enterprise Content rather than Information Intelligence.  Not quite so pumped on more acronyms – not sure what ECD brings to mind.  For “E” acronym overload: “EMC’s ECD includes ECM.”

Bigger news was the stepping down of Rick Devenuti that has been rumored for the last six months.  Taking his place is Rohit Ghai, who joined IIG/Documentum back in 2009 after career stops Symantec and Computer Associates.  Rick came to IIG/Documentum from Microsoft and brought along with a somewhat rigid Microsoft style.  We are looking forward to seeing what Rohit adds to ECD/Documentum.

EMC Announces Layoffs

EMC is planning restructuring efforts – not sure how this will affect the ECD/Documentum division.  The best article we found mentions only that an EMC spokesman said the following in an emailed statement:

the restructuring is “intended to enable EMC to rebalance and reorganize our workforce to best align with the opportunities ahead” and that it will “place priority on shifting impacted individuals to faster-growing areas of the business and expects to end 2015 with more employees than at the beginning.”

Readers can draw their own conclusions but, EMC did announce similar layoffs and hiring last year as well.

Documentum/IIG Earnings – 2014

The most relevant data for Documentum earnings can be found in the supplemental information in comparing the Information Intelligence Group’s earnings from 2013 and 2014 to other divisions of EMC.  We don’t get a specific breakdown of IIG Net income so only the analysis of revenue can be reviewed.

Overall we see the same trend we identified back in our Documentum earnings post of 2013.

Some interesting points:

• IIG Overall Revenues slightly down from 2013 (was up 3% in 2013 compared to 2012)
• IIG Product Revenues down 9% from 2013 (180 to 164)
• IIG Overall Revenues down 8% 4^th quarter 2013 to 2014
• IIG Product Revenues down 14% 4^th quarter 2013 to 2014
• IIG accounts for 2.62% of EMC overall revenue
• EMC Information Storage, RSA and Information Infrastructure Divisions Mostly Flat
• VMware and Pivotal account for most of the growth for EMC Overall

Documentum Thoughts and rumor mill – is a Spin-off Coming?

We have often said in previous posts back in April (Would EMC Dump Documentum?) that we didn’t feel EMC would execute the split as:

• Tucci bought Documentum – Given that Joe Tucci was at the helm of EMC when Documentum was bought, is still at the helm and vigorously stated in 2012 that Documentum would not be sold off, we see it as highly unlikely that Joe will admit defeat by making a news event about EMC for something that is still profitable but only accounts for 2.62% of revenue.  Joe’s quote in 2012 was that “I think you will see …(with Documentum/IIG) … a return to growth, probably not next year, but it will remain a part of the company.”

• Would Documentum be doing as well without EMC? – The girth of EMC from a funding and size of the company continue to help Documentum fund their services growth. EMC has great benefits and perks (including stock options) to attract people, would an independent Documentum be as attractive?

• Who would buy Documentum? – There isn’t an obvious suitor out there that would buy Documentum. Software is not the hot commodity it used to be (look at Rick Devenuti’s Alma Mater, Microsoft – how have they done over the last 10 years? Looks similar to Documentum). We proposed SAP  back in 2010 but it is hard to see anything materialize on that side given SAP’s OpenText relationship.

Those points said last year, consider new items including:

• Documentum hasn’t really grown and, outside of services, has continued to decline year over year in product revenue despite acquisitions and new products.
• Tucci – Joe’s current contract with EMC expires in February and he has talked about retirement but hasn’t committed to a date. Without Tucci at the helm, will a new CEO tasked with a return to growth keep Documentum?
• Rohit Ghai new ECD head – most of Rohit’s experience comes from Computer Associates – a leader in continuing software firms in a non-growth stage. Rumor mill also references multiple hires that might be coming in to “pretty up ECD” to help with a sale/spin-off.

Summary

IIG/ECD/Documentum head Rohit Ghai will definitely have some pressure in regards to returning to growth particularly given the alternatives including a growing Alfresco as well as additional options including Hadoop.  Without a return to growth, we would expect rumors to continue on a likely sale or spin-off of ECD/Documentum from EMC.