Profits Up, FileNet Buying Software Firm to Expand Product Line
To expand its product line, FileNet Corp. will buy a Massachusetts software company for $61 million worth of stock, the firms announced Tuesday.
Separately, FileNet also said Tuesday that it expects to post healthy second-quarter results.
With the purchase of Watermark Software Inc., based in Burlington, Mass., FileNet will be able to offer computer programs to help manage information for smaller computers. Both firms deal with document-imaging software.
“Our products are targeted at corporate, high-volume applications, and theirs are aimed more at smaller groups,” said Jordan Libit, FileNet’s vice president for marketing. “They were what we were looking for.”
James W. Reynolds, an analyst at Wedbush Morgan Securities, a Los Angeles brokerage, said the deal will allow FileNet to offer new products more quickly than if it had to design them on its own.
“New programs can take a long time to develop, and a company like FileNet can only do so much with its R&D; budget,” Reynolds said.
No layoffs are planned as a result of the merger, which is expected to be completed within a month, executives said. FileNet has 1,000 employees and Watermark has 65.
Founded by a venture capital group in 1993, Watermark develops products to manage document-imaging systems for small companies. Watermark had $3.6 million in revenue for the first six months of 1995, and expects revenue to total $10 million for the year.
The firm’s top executives will remain in their current jobs, including company founder and chief executive David Skok.
The FileNet stock will be divided between the venture-capital firms that initially backed Watermark and some of its employees with stock options, said Kevin Lach, Watermark’s marketing director.
Also Tuesday, FileNet said it expects to report a $6.7-million profit, or 38 cents a share, for the three months ended July 2, up 22% from a profit of $5.5 million, or 35 cents a share, for the same period a year earlier. Revenue for the second quarter was $35 million, up 25% from revenue of $28.1 million last year, the company said.
