Documentum – EMC Sale of Syncplicity

Only July 7th, Skyview Capital announced that had entered into a definitive agreement to acquire Syncplicity from EMC with EMC retaining a financial interest in Syncplicity.  The complete Syncplicity press release is here.  This post will discuss our thoughts on the sale.

Syncplicity was bought by EMC for the IIG division (ECD at the time) back in 2012.  At the time, Syncplicity was a strategic effort to provide “Dropbox for the Enterprise”.  While numbers are not made available individually for products within ECD, it was a common understanding that Syncplicity, as a new product, was a growth area for ECD.

The sale of Syncplicity was a surprise for a number of different reasons:

• EMC, with John Tucci at the helm, had never really sold off any product to another entity. While VMWare had been launched as a separate company, very successfully, no other purchases by Tucci had ever been sold.  With Tucci’s retirement looming, the sale of Syncplicity has some people concerned that other components, including Documentum, might also be sold off.
• Syncplicity was the offering that could talk mobile and hybrid cloud access for Documentum. Without Syncplicity, Documentum is left with only a token iPad client that has not been enhanced much due to the Syncplicity purchase.
• Syncplicity was bought by Skyview Capital, a private equity firm rather than another software firm. While details are not generally available, Skyview does not seem like a company that could leverage their own salesforce and infrastructure to allow Syncplicity to expand.  Most outsiders are viewing the transaction as not strategic but just EMC getting rid of non-core products.

In many ways, the sale of Syncplicity by EMC makes sense.  As a mature company, EMC is evaluated on earnings per share, not start-up revenue growth while running at a loss.  Syncplicity, competing against Box and other firms that are investing in Synch and Share and haven’t yet produced a profit, would struggle to meet EMC’s EPS needs while contributing to expenses.  As a separate company with an EMC investment, the concern about EPS diminishes.

One concerning note for Documentum users, in the press release announcing the sale, EMC stated that the sale would

enable EMC to increase our focus on core EMC Information Infrastructure investments.

When coupled with Project Horizon as well as other investments require to evolve and maintain the Documentum product, a valid concern is could this happen to Documentum?  As a division that had:

• a software revenue decline of 10% in 2014
• a 1st Quarter 2015 decline of 22% in software revenues compared to 1st quarter 2014 with Syncplicity adding to revenue (but not anymore)
• new ECD efforts like Project Horizon not scheduled to add revenue for a significant time and at significant risk

Many clients are asking if the move with Syncplicity indicates that EMC would want to get out of the non-infrastructure software space and may look to move Documentum.   Questions for clients to consider:

• Who would EMC sell Documentum to? We had always proposed more traditional software vendors (ex: SAP, Computer Associates….) that would appreciate Documentum’s install base and maintenance stream.
• What would be the new owners’ thoughts regarding the product roadmap and continued support of existing products?
• How would it affect Project Horizon, since it is dependent on EMC software components?

Let us know your thoughts on the sale below.