Open Text can buck buyout trend says LDIC’s Michael Decter

With the recent acquisitions of many top Canadian tech firms, including Zarlink, MOSAID and Ruggedcom, by larger US-based concerns, it’s natural to think that a peer experiencing tremendous growth would fall into the same category.

But are times changing?

Michael Decter, President and CEO of Toronto-based investment firm, LDIC Inc. appeared on Market Call with host Mark Bunting Wednesday, and fielded a call on Waterloo-based Open Text (TSX:OTC).

Decter, who has owned the stock “for a couple quarters” now says the company is well managed, and is generally bullish on its prospects. When Bunting asked if Open Text was a takeover candidate, Decter said he believes this is not the most likely scenario, as the company is now large enough to be the acquirer instead of the acquired, and has a real opportunity to grow by continuing to be a consolidator in the enterprise content management space.

Last August, Open Text joined Research in Motion in the Waterloo billion dollar club, reporting fiscal 2011 revenues of $1.03 billion.

Open Text, which got a new CEO last December when former Rackable boss Mark Barrenechea took the reigns, grew out of a collaboration between the University of Waterloo and the New Oxford English Dictionary, the project was a partnership with the Oxford University Press to computerize the Oxford English Dictionary. This engineers on this project realized that it required developing search technologies that could be used to quickly index and retrieve information. The search technology they developed, which incorporated full-text indexing and string-search technology, was recognized as being useful for other electronic applications. In 1991, at about the same time the Internet was emerging, the results of this project were commercialized by a private spin-off called OpenText Corporation.

On May 1st, OpenText announced an agreement to buy EasyLink Services International, a provider of cloud-based electronic messaging and $310-million, management says the acquisition will provide OpenText with its first foot in the cloud market. The move followed last July’s $260-million pickup of Global 360 Holding Corp., which expanded Open Text’s expansion into the the fast-growing business process management market.

At press time, shares of Open Text on the TSX were down 2.2% to $48.87.