Autonomy buys e-discovery firm Zantaz

Autonomy Corp. is acquiring Zantaz, a provider of e-discovery and content archiving software, for $375 million in cash, the companies announced Tuesday.

The combined Autonomy-Zantaz could be an attractive acquisition target for a larger infrastructure software vendor such as Oracle, IBM, or EMC, said Barry Murphy, principal analyst at Forrester Research.

Autonomy, of Cambridge, England, will operate Zantaz, of Pleasanton, California, as a division of Autonomy. Zantaz CEO Steve King will retain his position at the Zantaz division.

The publicly traded Autonomy posted net profit of $48 million on revenue of $250 million in 2006, while privately held Zantaz reported $106 million in revenue, according to a May 2007 IDC research report.

E-discovery is an emerging market within the field of data storage, archiving, and recovery. Organizations are increasingly being called upon to produce copies of electronic documents, such as e-mail, voice mail, and instant messages, to respond to lawsuits or government investigations. IDC reports the global market for e-discovery software and hosted services grew to $477 million in 2006, an increase of 47 percent from 2005's $330 million. The revenue split between software and hosted services is about 60-40 IDC reports.

The combination of Autonomy and Zantaz will bring together consolidated archiving, e-discovery, analytics, and real-time policy management services into one system, the companies stated in a news release.

Zantaz will bring to Autonomy an e-mail archiving capability from the Zantaz portfolio both as a software product and as a hosted service offering, said Murphy. Conversely, Autonomy will provide Zantaz with added market reach it had not been able to develop on its own.

"So Autonomy becomes very attractive as a combined entity with Zantaz to the software infrastructure giants," he said.

Autonomy says the acquisition will produce cost savings of $25 million a year and be accretive to earnings in six months. The deal is expected to close by August, assuming shareholder and regulatory approvals are granted.

This story was updated on July 3, 2007