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OpenText CEO Mark Barrenechea Looks Ahead

NEW YORK (TheStreet) ––For OpenText (OTEX - Get Report) CEO Mark J. Barrenechea, Amazon.com (AMZN) presents a cautionary tale.

In an interview with TheStreet, Barrenechea contrasted OpenText's record revenue growth in its quarterly results and annual, released yesterday, with Amazon's disappointing results this quarter. He argued that OpenText's quarter "really stands in contrast to other companies. You look at Amazon, it's not sustainable. You can't be losing $800 million, and customers have to be very worried about moving their workload into a company that's losing $800 million."

In January, OpenText bought GXS, a leading provider of B2B integration services, to expand its enterprise information management business. Barrenechea said in the press release announcing that acquisition, "Our combined cloud will now manage over 16 billion transactions per year, approximately 600,000 trading partners and 40,000 customers." The purchase price was $1.065 billion in cash and 1,297,521 OpenText common shares. OpenText sells its Semantic Navigation software, which "enables organizations to engage online audiences with contextually relevant content and connect them to targeted products and ads," on the Amazon Web Services marketplace, where it competes with Amazon's own information management products. 

For its fourth quarter in the 2014 fiscal year, OpenText’s revenue grew a record 42% year-over-year to $494.0 million. The company earned $1.05 per share, up from 72 cents a year ago. Analysts polled by Thomson Reuters expected revenues of $480.02 million and earnings of 94 cents per share. 

For the 2014 fiscal year, which ended June 30, total revenue was $1.624 billion, up 19% year-over-year, as cloud services revenue, license revenue, and customer support revenue grew 108%, 11%, and 7% year-over-year, respectively. OpenText earned $3.37 per share in fiscal 2014, up 21% from fiscal 2013. Analysts expected earnings of $3.26 per share on revenues of $1.611 for the full year.

Shares were gaining 16.2% to $56.30 this morning.

“The results are the results and they’re very good. We stepped up to larger, more transformative transactions. We did 26 transactions greater than 1 million. It was a very solid performance,” Barrenechea said in the interview. “But looking beyond the numbers, we have really strong momentum coming into our new fiscal year. We’re aligned, we do three things really well—information management, B2B integration, and compliance. We’ve laid out a growth agenda for the year, and we’re ready to look at more acquisitions.” He plans to spend $3 billion in acquisitions over the next five years.

OpenText also appointed a new CFO, John Doolittle, formerly CEO of Mattamy Homes Limited, Canada's largest new home builder.

Barrenechea declined to name potential areas of expansion, but said that the company has strong momentum going into its new fiscal year. "We're in the middle of a strong product cycle. We're transitioning our customers. We're very profitable in the cloud. We've got a lot of market initiative."

OpenText, Canada’s largest software company, makes enterprise information management software. It has over 8,000 employees with offices in forty countries and serves 100,000 customers.

--Written by Laura Berman in New York

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