Leading printing and imaging company Lexmark International Inc. (LXK) has reached yet another milestone, by closing the acquisition of enterprise content management (“ECM”) company Perceptive Software Inc. for $280.0 million in cash.
In a recent filing, the company disclosed that it has completed the acquisition, following the approval from market regulators a few days back.
Perceptive Software, a privately held software company, has been in the ECM business for the last 15 years, generating $84.0 million in revenue during the last fiscal year. The company’s ECM software solution has a wide reach and covers sectors such as government, education and healthcare. For Perceptive, the acquisition will be a boon, since it will be able to take advantage of Lexmark’s market position, at the same time maintaining its employee strength.
For Lexmark, the attraction lies in the growth prospects of the ECM market, which would augment its revenues going forward. On the other hand, Lexmark will have to overcome stiff competition to move up in this segment. Alfresco Software, the leader in open-source ECM, recently reported its fiscal 2009 results, where revenue jumped 61.0% compared to the year-ago quarter.
Alfresco is witnessing robust growth in new subscription customers and has also expanded its partner network. The company has done business in America, EMEA and Asia, adding 120 new customers in these regions. So, to gain market share from Alfresco, Lexmark will have to position itself well and come up with innovative strategies.
However, while we are encouraged by Lexmark’s performance in the first quarter of 2010, we are a bit apprehensive about its debt level, the intense competition it faces in the printing space and increasing availability of cheaper substitutes like ink/consumables supplies. Keeping this in mind, we believe that the Perceptive acquisition will provide it the much-needed business diversification, and will thereby bring greater stability to its business model.
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