IT and Business Insights for SMB Solution Providers

OpenText Buys Carbonite

The $1.42 billion deal is designed to help OpenText boost cloud revenue, add recurring revenue, deepen its security solution portfolio, and expand beyond an enterprise-heavy customer base into the SMB and “prosumer” markets. By Rich Freeman

Data protection vendor Carbonite has agreed to be acquired by enterprise information management vendor OpenText in a deal value at approximately $1.42 billion.

The transaction, which is expected to close within 90 days, will help OpenText boost cloud revenue, add recurring revenue, deepen its existing portfolio of security solutions, and expand beyond an enterprise-heavy customer base into the SMB and “prosumer” markets, according to Mark J. Barrenechea, OpenText’s CEO and CTO.

“Cloud platforms and secured, smart end-points are essential Information Management technologies as businesses transform into Industry 4.0,” said Barrenechea in prepared remarks. “This acquisition will further strengthen OpenText as a leader in cloud platforms, complete end-point security and protection, and will open a new route to connect with customers, through Carbonite’s marquee SMB/prosumer channel and products. We are very excited about the opportunities that Carbonite will bring, and I look forward to welcoming our new customers, partners and employees to OpenText.”

Known primarily as a provider of backup and high-availability solutions, Carbonite launched a bid to reposition itself as a data protection vendor offering both BDR and security products earlier this year when it bought Webroot for $618.5 million. That acquisition also added Webroot’s substantial population of MSP partners to Carbonite’s VAR-oriented channel. Carbonite subsequently placed a number of Webroot executives in senior leadership positions for the combined businesses.

Other acquisitions have figured in Carbonite’s competitive strategy in recent years, including its 2015 purchase of Evault from Seagate, its 2017 purchase of Double-Take Software, and last year’s purchase of Mozy.

Mohamad Ali, the CEO who engineered those and other moves, stepped down in July. Board chairman Steve Munford has been serving as interim CEO since then.

“Following expressions of interest from multiple parties, the Carbonite Board conducted a thorough and comprehensive process, which included contact with a number of strategic and financial parties, to identify the best way to maximize shareholder value,” said Munford in a media statement. 

“The Board strongly believes that a transaction with OpenText delivers compelling, immediate and substantial cash value to shareholders…Carbonite has expanded its solutions to become a leader in cyber resiliency. We have grown through both organic and inorganic opportunities over the years, enhancing our routes to market, diversifying our customer base, and assembling a talented workforce, while adding meaningful scale. Joining with OpenText is an exciting next step for Carbonite.”

For OpenText, buying Carbonite offers an opportunity to add endpoint protection, DNS filtering, and security awareness training products to a security product family that already includes data loss prevention, digital forensics, and endpoint detection and response systems. Carbonite’s backup and data protection offerings extend OpenText’s core information management platform as well.

“We entered Fiscal 2020 with a solid balance sheet and we are off to a strong start with the announced acquisition of Carbonite as part of our Total Growth strategy,” stated OpenText EVP & CFO Madhu Ranganathan in a press statement. “We are excited by the opportunity to bring forth exceptional leadership in operational execution and integration capabilities to Carbonite. Once integrated, we expect to increase our annual recurring revenues, deliver strong cloud growth, and expand cloud margins and adjusted EBITDA. The resulting growth in cash flows will enable us to maintain a healthy balance sheet, deliver strong earnings, and continue to deliver consistent growth in dividends to shareholders.”

OpenText reported a 4.5% increase in revenues and a 104.8% jump in net income in its most recent quarterly financial statement on October 31st. Those results included a 7.1% year-over-year increase in annual recurring revenues, to $556.6 million, fueled by a 15% gain in cloud services and subscriptions, to $239.3 million.

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