Over the past few years, printer giant Lexmark International (LXK) has been working hard to transform its business, focusing its efforts on the premium printer segments. That strategy has proven successful, and its stock has gone from $14.23 to $35 over the past year.
Now, Lexmark is making a play into the software market: The company announced Friday it is purchasing Perceptive Software for $280 million in cash. The privately-held company provides so-called enterprise content management (ECM) services, which is a market that is growing roughly 10% a year.
Perceptive will remain an independent operation within Lexmark, which makes a lot of sense: It's tough to mesh hardware and software companies. Besides, Lexmark has not been an active acquirer.
Taking a Look at Perceptive
Founded in 1995, Perceptive Software has built a strong footprint in the ECM business, with more than 2,500 customers across 30 countries. Its key market segments include health care, government and higher education.
Perceptive's flagship product is called ImageNow. Essentially, the software helps companies manage huge amounts of content -- allowing for collaboration, storage and even mobile access. The upshot is higher productivity and lower costs.
Last year, Perceptive generated roughly $84 million in revenues, and has been one of the fastest growing players in the ECM market). It's a highly competitive business, with rivals like EMC (EMC). But Perceptive has been able to differentiate itself with a technology that is fairly easy to use and integrate into complex information technology environments.
Pumping Up Revenues
Being owned by Lexmark certainly offers advantages to Perceptive. For example, the company will be able to leverage Lexmark's low-cost R&D capabilities in India. And Perceptive will get a boost from its acquirer's global footprint, both in terms of its customer base and call-center locations.
Lexmark has made it clear that the main goal of this deal is to accelerate revenues. As a result, the acquisition won't result in any significant cost savings, and its effects will likely take some time to manifest themselves. But given Lexmark's long-term strategy of refocusing on higher-end products, expanding into adjacent markets like enterprise content management looks like a smart move.
What is Short Selling?
Make a profit when stocks prices fall.View Course »