- The Washington Times - Wednesday, April 3, 2002

Bethesda-based EGrail Inc. hired Joseph Payne as chief executive 13 months ago to build the small company.
He built it into an acquisition target, and a California technology firm yesterday bought EGrail for $10 million.
FileNET Corp. purchased 5-year-old EGrail's assets in a cash transaction to bolster its software services.
FileNET pursued EGrail because it coveted the company's Web content software, which would let firms update their Web pages without having to master a programming language like HTML.
EGrail, with 45 employees, couldn't compete with bigger firms that had larger sales forces, FileNET Chief Executive Lee Roberts said yesterday in a conference call with investors.
"EGrail's problem is they are a small company competing against large, established players," he said. "They simply didn't have the distribution capability or the marketing muscle, and we think we do."
FileNET has 1,800 workers and 3,600 customers to whom it can market EGrail's Web content software. FileNET competes in the enterprise content management software industry software to help businesses improve efficiency. EGrail's Web content application represents a smaller segment within the enterprise content management software business.
But it is an application FileNET does not have.
"This fills a hole in their offering," Mr. Payne said.
Mr. Payne, a former vice president at Vienna, Va., software firm MicroStrategy Inc., said that when he started he expected EGrail would end up making an initial public offering of stock or end up being acquired by another company. It makes sense to align EGrail with a larger firm, he said.
"When you're a small company in this environment, you spend a lot of time answering questions about your viability. People ask whether you're going to be around in a year. It didn't keep us from doing deals; it just made it harder," Mr. Payne said.
EGrail, a privately held company whose majority owner is Reston venture capital firm Mercator Broadband, recorded an $8 million net loss last year on revenue of $5 million, FileNET Chief Financial Officer Sam Auriemma said.
It has 50 customers for its Web content software which costs up to $250,000 including the U.S. State Department, the General Accounting Office and Eckerd drugstores.
FileNET, a publicly traded firm with $332.5 million in revenue last year, will take a $1.5 million charge related to the acquisition of EGrail, probably during the second quarter. The two companies were in talks the past six months.
About 90 percent of EGrail's 45 workers are expected to go to work for FileNET.
For now, operations at EGrail's development center in Bethesda won't change, but FileNET could begin to move people to its West Coast offices later this year.
EGrail trimmed its work force from 70 to 45 over the past year as it relied more heavily on outsourcing to cut costs.
Mr. Payne, Vice President of Sales Ray Tacoma and Chief Financial Officer Glenn Roberson all plan to leave EGrail. Co-founders Albert Brown and Philippe Burlina plan to work for the new company.


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