What's Next for Open Text?

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Yesterday, Open Text Corp (Nasdaq: OTEX) reported its earnings, and the stock price told the whole story; that is, it plunged 22.48% to $16.72. Then again, the enterprise software industry is becoming a killing ground for investors.

Open Text is a leader in enterprise content management (ECM for short). In other words, the company allows workers to collaborate and integrate knowledge across an organization. And the applications are quite broad: managing the paper-intensive processes of clinical trials, corporate governance (especially the new Sarbanes-Oxley rules), engineering document management, corporate training, and so on.

The company reported that last quarter's net income came to $9 million or $0.16 cents per share. This was a big miss; the Street expected earnings of $0.28 cents per share.

However, sales were particularly strong, increasing 98% to $105 million.

The company expects the weakness to continue and provided new guidance: Next quarter's revenues are expected to range from $87 million to $93 million and earnings from $0.07 cents to $0.12 cents a share. Consensus was for $0.24 cents a share on $98 million in revenues.

A big part of the strategy for growth for Open Text has been acquisitions. A major deal was for Ixos, which helped expand the company's product offerings. In fact, this week Open Text announced the $24 million purchase of the Vista Plus Suite from Quest Software (Nasdaq: QSFT). The software provides business-critical storage for applications from Oracle (Nasdaq: ORCL), PeopleSoft (Nasdaq: PSFT), and SAP (NYSE: SAP).

However, it appears that the enterprise software market is still weakening -- as indicated by the guidance of Open Text. Consequently, we may see other enterprise software players warn.

Fool contributor Tom Taulli does not own shares in any of the companies mentioned.