Autonomy Plans to Acquire Etalk

Only a few days after NICE Systems' acquisition of Dictaphone's Communications Recording Systems (CRS) business, enterprise infrastructure-software provider Autonomy has announced plans to acquire quality-monitoring vendor etalk. Under the $70 million deal, etalk shareholders will receive $30 million in cash with about 10.8 million Autonomy ordinary shares, valued at about $40 million. Autonomy has also unveiled its first-quarter earnings, ending March 31, 2005. The company pulled in revenues of $18.5 million, a 13 percent increase from $16.4 million for the first quarter of 2004. The announcement represents the company's twenty-first consecutive quarter of profitability. Etalk shareholders will have the chance to earn up to an additional $23 million in shares contingent upon meeting or surpassing agreed software sales metrics in the six-, nine-, and 12-month periods following completion. The transaction is expected to be completed in the third quarter of 2005, which will mark the availability of combined Autonomy and etalk products. Much of Autonomy's focus is on enabling enterprises with the ability to unify, manage, and use unstructured data, but the move is not the company's first effort to venture into the contact center space. Part of the company's product suite includes Audentify, a tool that monitors and records customer interactions. Additional divisions within the company include Aungate, an electronic communications management technology supplier for regulatory compliance in the enterprise, and Virage, a media communication and content-management software provider. With the acquisition, however, Autonomy intends to deepen its reach in the contact center market. The acquisition does not come as a surprise to Seema Lall, industry analyst at Frost & Sullivan, she expects it will help etalk expand its product offerings to other parts of the enterprise. Etalk's customers will get greater value out of their implementations by supplementing them with Autonomy's products once the integration process is complete. "This should also help etalk expand its reach globally, particularly within EMEA wherein they did not have much of a presence prior to the acquisition," Lall says. According to Roger Woolley, vice president of marketing at etalk, the acquisition responds to customer requests for enterprise contact center applications that can manage hefty loads of customer interactions and data. "Our customers tend to have large workforce management solutions, but their challenges are that they want to record larger volumes of customer interactions, and then use analytics to categorize those calls to improve their business," he says. Woolley also says that the acquisition is a "natural fit" because of the companies' common goal to provide enterprise solutions. "If it was a competitor, then they are buying you for your technology or your customer base and they are going to streamline the business, but in this situation they bought us for our ability to successfully sell into the contact center space," he says. "[It] enables us with some of their enterprise technology that can strengthen our product offering." According to David Gould, chairman of the board and CEO of Witness, however, the acquisition represents consolidation within point systems and across the workforce optimization landscape. "If you step back and look at the technology markets overall, and software markets specifically, there are never really more than two or three players in any given market because you don't create enough scale to stay in the business long term," he says. "What happens is the weaker players end up getting consolidated." Lall considers the quality monitoring space in terms of size to be segmented into two categories, with Witness Systems, Verint Systems, and NICE Systems in the top tier, followed by smaller players Envision and etalk, but Envision, she says, may be the one that should watch the acquisition the closest. "Envision is a much smaller play, but nonetheless Envision has also made inroads into the enterprise space, so Envision might be the one that needs to keep close tabs on this acquisition." Related articles: NICE Buys Dictaphone's Recording Systems Business QM Is Poised For Growth The 2005 CRM Service Leaders--Part I