Interwoven bought: now surely Vignette will be next

News that Autonomy is buying Interwoven will do little to dampen the fears that Vignette is not long for this world.

Nor will its most recent preliminary results, which suggested it will fall well short of its Wall Street expectations when it announces them officially in the next few days.

Announcing its prelims on January 5, Vignette said it expects to post revenue of $35- to $37m for its Q4. That compares with year-ago fourth quarter sales of $52.7m – suggesting latest results down around 40% year on year.

Asked why Autonomy chose to acquire Interwoven for $775 when it could have picked up Vignette for a fraction of that sum, Autonomy’s CEO Dr Mike Lynch spelled it out only too clearly for me: “We don’t want to buy things that are broken. Vignette has been in a nosedive.” …[click continue reading for more]…Announcing its preliminary results earlier this month, Vignette’s CEO Mike Aviles said, “The weak economy, foreign exchange fluctuations and the continued re-build of our go-to-market capabilities impacted our fourth-quarter results.”

Vignette’s stock has lost half of its value in the last year, down from a 52-week high of over $15 to just over $7 at the time of writing. Its current market cap, at around $170m, is woefully low for a technology company that will post sales just under the same amount — $170m — for full year 2008, and that had over $100m cash in the bank as of its latest published results.

As Aviles said at the time of its preliminary results, “Vignette’s balance sheet remains strong and provides us with the ability to build for the company’s future.”

But just as important as cash to tech companies – to any company – is growth and profitability. Growth is a distant memory at Vignette today, while during its preliminary fourth quarter it said it was, “Unable to update guidance for GAAP net income at this time due to its evaluation of various year-end GAAP-related accounting charges.”

In its third quarter, it posted non-GAAP net income of $1.2m, and a GAAP net loss of $4.3m.

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Vignette CEO Mike Aviles: still hoping for a turnaround?

When I profiled Vignette in the July issue of CBR last year, I predicted that it would be bought within a year. But it was actually looking somewhat healthier then that it is now. “With a market cap today of only $307m, yet with sales in 2007 just shy of $200m and almost $100m cash in the bank, Vignette must look like a bargain to potential buyers, even if its recent performance has been a little ‘lumpy’,” I wrote in July.

“Which would be a shame, because few doubt that Vignette has brilliant Web content management technology and a credible story in enterprise content management, too. But it is a challenging time for any public company with revenue under $200m given the high cost of compliance, and even more challenging if they see patchy results,” I said.

I concluded, “I would like to think Vignette can grow more strongly and steadily, but I have to concede that, on balance, I doubt Vignette will be around in its current form this time next year. I would love to be proven wrong.”

Well Vignette has another few months to prove me wrong, and demonstrate that the firm has a viable future as a stand-alone entity. But if Interwoven — which grew around 10% according to its latest preliminary figures – sees a brighter future as part of a larger company with greater reach and deeper pockets, what hope Vignette?

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