Xiotech Jumps Into Document Management By Acquiring Daticon

The acquisition brings Xiotech 170 new employees and a new customer base for its storage arrays, said Mike Stolz, vice president of marketing for the Eden Prairie, Minn.-based company.

Daticon's technology scans paper documents into electronic form and converts them and other electronic documents into a standard format, Stolz said. The company's primary customers use the technology for litigation support, but it is suitable for any company that wants to get off paper documents, he said.

Xiotech signed the agreement to acquire Daticon on Tuesday, the same day Daticon filed for Chapter 11 bankruptcy. Daticon had gone through a couple of years of down sales as well as a leveraged buyout, leaving it saddled with debt, according to Stolz.

About 40 percent of Xiotech's revenue comes from the channel, Stolz said. Since the closing of the acquisition is still subject to a court review, he could not discuss specific channel plans for Daticon. "It's early thinking, but the services Daticon provides leverage themselves as professional services for our channel partners," he said.

Rich Baldwin, president and CEO of Nth Generation, a San Diego-based solution provider that works with Xiotech, said document management has become a good market for those with storage expertise.

"EMC bought Documentum a couple years ago, and now all the little guys are following," Baldwin said. "A lot of vendors are going for solutions that add value and margins."

In the past, Daticon was partly owned by Daniel Gordon, a former president of the Global Energy Markets division of Merrill Lynch Capital Services and Merrill Lynch and Co. Late last year, Gordon was sentenced to 42 months in prison and forced to forfeit $43 million that he obtained from Merrill Lynch in 2000. According to a Department of Justice statement, Gordon bought a 70 percent share of Daticon in November 2000 for $23.5 million and was the company&'s chairman from 2000 to 2002.