Monday, January 17, 2011

Kofax Sells Hardware Business

As previewed on our blog yesterday by an Anonymous poster, Kofax has sold its hardware business. The price is listed at $23.2 million, which seems startling low what was reported as a $126.6 million business for Kofax's fiscal 2010 (ended June 30). Of course, the EBITDA was only $1.8 million, for a 1.4% margin, down from $8.8 million the previous year.

We all knew Kofax wanted to sell this hardware distribution business, which operates primarily in Europe, for some time. For a couple years, Reynolds Bish cited it as a profitable entity that helped contribute to Kofax's bottom line, but those tight margins last year, were likely the tipping point that made Kofax finally go ahead with the sale.

I guess the Anonymous poster already pointed out the irony in the fact that Dicom, which was basically the distribution business, bought Kofax in 1999. A couple year's ago, the entity's name was changed to Kofax, and now Kofax is selling off the former Dicom business, which is going to be renamed Dicom.

According to the press release, "Joachim Froning, Senior Vice President of Hardware Distribution Sales at Kofax and the anticipated Chief Executive Officer of Dicom International AG." The deal was mainly financed by Hannover Finanz, "a private equity firm headquartered in Germany." We wish the new owners the best of luck and hope they will be able to reverse the trend of declining profits.

There was also this interesting quote in the press release (from Kofax CEO Reynold Bish): “The proceeds from this transaction and the planned restructuring will better position us to focus on and further grow our software business revenues and earnings both organically and via our acquisition strategy. This is particularly timely as we recently concluded a successful half year that is materially better than the expectations previously conveyed in our Interim Management Statement dated November 4, 2010. We look forward to announcing these results on February 7.”

As of this posting, Kofax's stock shot up almost 5% following this morning's (London time) announcement of the deal. I guess for Kofax this equals addition by subtraction.

9 comments:

Roberto Arias said...

My best wishes for new Dicom, but they come back to a different market without the potential of a Capture Software like Kofax... it going to be very hard!!!
They have to reinvented to compete against Ingram Micro, TechData, etc... that works with a low hardware margins.
The questión would be... What is the added value of Dicom to the resellers that buy the scanners?

SoftwareSelector said...

OK, it seems that things are going to change at Kofax...

My company is supporting a customer in the software selection for a content capture platform for a quite complex project (several millions of pages per year to be handled, dozens of layouts, etc: the solution will be implemented in a service center so performance, scalability and reliability are mandatory).

We have shortlisted to a couple of vendors, one is Kofax Capture (with the KTM option) and the other is EMC Captiva.

So far, in the evaluation checklist the two solutions shows very close results, and the products seem *quite* similar in terms of features and architecture. Difficult to evaluate the actual scalability without doing some intensive tests... but this is another story.

These last news about Kofax selling the HW business, and still being an acquisition target as well, are now raising some doubts about Kofax's future.

Would you bet on Kofax, or right now EMC could be a "safe harbor" in terms of company sustainability on the long term?

DIReditor said...

It's my thought that if Kofax gets acquired (and I'm not saying that is imminent), it will be for its capture technology, so whoever buys it will not likely kill the software. I mean EMC bought Captiva a few years ago, and you are still considering them. I don't want to endorse Kofax over EMC Captiva - it sounds like you are doing enough testing to figure out which one suits you better, but on factor I wouldn't worry about is the stability of Kofax. EMC is probably the only potential acquisitor that could pick up Kofax just for market share and then kill the product, and I really don't think that would happen. If HP, Oracle, or IBM buys Kofax, they would certainly continue to support and sell Kofax Capture and KTM.

Anonymous said...

Kofax still has a hardware entity producing scanner graphic controller boards for several OEM customers. So they are not totally out of the hardware business

Anonymous said...

IBM bought Datacap. It would have no interest in Kofax. Datacap is also at least as good technically as Kofax and with IBM's resource behind it, it deserves a look by anyone looking at Captiva or Kofax.

Mubashir Shafi said...

Dear admin can you please tell me what is this Interim management about?

Anonymous said...

anyone know where i can find a Kofax Admin? I have tried job boards like (Dice, CareerBuilder, Monster) and LinkedIn. I am not finding anyone? Can someone assist me?

Ethan said...

Software Selector, What software package did you end up reccommending, Kofax or Captiva? I am in a similar situation. I am attempting to create a competitive feature matrix on order to determine which software package is better. I am also wondering if there are business areas where one software platform wins over another?

klotylda said...

I've never really had issues with our hardware, but software... Gosh, it used to be a nightmare - it would break every couple of days. Thank god we went for a different one eventually, and with dynamics 365 support all the problems are fixed promptly.