Seagate Acquires MetaLINCS For $80 million

First ZANTAZ, then Stratify, and now MetaLINCS – all within 5 months. The e-discovery space is consolidating fast!

On December 6, Seagate announced its acquisition of MetaLINCS. Financial terms were not disclosed, but my sources tell me that the price is $80 million. Given that MetaLINCS is a 50 person company with fewer than 25 customers , this is a fantastic outcome and I congratulate the MetaLINCS team. My educated guess is that in 2007 MetaLINCS will earn $5 million to $10 million in bookings, making this a healthy multiple of 8-16X. Contrast that to the 5X revenue paid by Iron Mountain for Stratify, and MetaLINCS shareholders clearly got a great deal.

That still leaves the question of why Seagate, a non-entity in e-discovery, would want to pay such a rich price. The answer, according to Seagate, is its desire to grow beyond manufacturing hard drives by having its services group provide a broad range of “solutions”, including archiving, back-up, recovery, and e-discovery. EVault, acquired last year for $185 million, is the backup and recovery part of that equation; MetaLINCS is the e-discovery component; and, say the analysts, don’t be surprised if an archiving acquisition is next.

Does Seagate’s entry into the e-discovery market make any sense? I don’t think so, and here’s why: there is a mismatch between Seagate/MetaLINCS and its target market. Seagate’s services offering will appeal most to mid-market companies which often outsource archiving, backup, and recovery. Seagate admitted as much when it announced the EVault deal. But the mid-market will be the last place to adopt e-discovery software like MetaLINCS; it is the Global 2000 who will move first, as they are the most sophisticated and in the greatest pain. For the limited amount of mid-market e-discovery business that is out there, Seagate/MetaLINCS will compete with every other service provider, from Kroll to Stratify to the hundreds of mom-and-pop shops across the country.

Net net: this acquisition is great for MetaLINCS, is small enough to be immaterial for Seagate, and will likely have no impact on the e-discovery market which will be won and lost in Global 2000 companies that are not interested in a Seagate/MetaLINCS service offering.

First ZANTAZ, then Stratify, and now MetaLINCS. It makes you wonder who will be next.

An Eventful Day

Thursday, December 6 was a big day for several e-discovery companies. Starting on the home front, it was Clearwell’s 3^rd birthday and we celebrated by announcing our deployment at Bear Stearns. Looking at where we are now, it’s hard to believe that 3 years ago the company consisted of a few guys with an idea. Today, we have over 100 customers who rely on Clearwell for e-discovery, and we are thrilled to count Ruben, Christoph and the team at Bear Stearns among them.

That same day, MetaLINCS announced its acquisition by Seagate (more on that to follow shortly), and Guidance announced the appointment of a new CEO. Victor Limongelli was promoted from President to the top job after what sounds like a comprehensive evaluation of both internal and external candidates by Guidance’s board. I always enjoy my conversations with Victor and applaud Guidance’s decision.

All in all, an eventful day.

Now, That's Customer Feedback

To the long list of reasons why e-discovery companies should be good to their customers, we can now add one more: because if you don't, they might blog about you and say nasty things. That's what has happened to Metalincs on this blog which carries the intriguing description of "legal software whistle-blower" in its web page address.

I have no idea who this person is, but their comments about Clearwell's e-discovery solution are well-informed and accurate.