Perceptive Software Shows Significant YOY Profit Improvement

From Lexmark's year-end/Q4 2013 report:

For 2013: Perceptive Software revenue was $224 million. Perceptive Software revenue, excluding acquisition-related adjustments of $16 million, was a record $239 million and grew 48% compared to 2012.

For Q4 2013: Perceptive Software revenue growth of 60% in quarter (70% non-GAAP, 15% organic growth), 43% in full year (48% non-GAAP).

From transcript of conference call (on SeekingAlpha.com):

"We delivered strong year-to-year improvement in Perceptive Software's profitability for the quarter and the year, and we expect continued Perceptive Software operating margin expansion in 2014 and beyond."

"Perceptive Software, delivered significant year-to-year improvement in profitability this quarter, up $9 million, driven by the 2 factors we've been focused on. First, we delivered solid Perceptive Software growth year-to-year, including good license revenue growth. Second, with the actions we started to take last year, we've been able to reduce Perceptive Software's organic cost and expense growth without negatively impacting revenue growth. And for the full year 2014, we expect to achieve double-digit software revenue growth and remain committed to delivering a positive and expanded software operating income margin."

FY2013:
"Perceptive Software had a slight operating loss of $2 million, an improvement of $23 million versus 2012. We expect continued substantial improvement in Perceptive Software operating income in 2014."

For 2014: "Perceptive will grow a bit faster than 15%, MPS a little less than that."

Spigraph Acquires Dicom-Initial Thoughts

In what is being billed as a merger of Europe's top two value-added distributors (VAD) in the document capture space, Spigraph has acquired Dicom. Spigraph, based in France was founded in 1997 and has been expanding rapidly in recent years after taking on some venture capital in 2011. Dicom, which was founded in 1991, acquired the ISV Kofax in 1999 and then was spun off by Kofax in 2011.

When we talked last year with Dicom executives last year in the wake of the appointment of former software executive Rudolf Gessinger as chairman, they positioned a then recent announcement of a partnership between Kofax and Spigraph as non-threatening to Dicom's business. The Dicom execs positioned ALOS (which had been acquired by Spigraph and expanded at VAD's presence significantly in Dicom stronghold's Switzerland and Germany) as primarily in the systems integration business and Spigraph as stronger as a VAD in geographical regions like France, where Dicom was not particularly strong.

This absence of overlap was reenforced in a quote from Joe Froning, CEO of Dicom International, which appeared in the recent press release announcing the merger with Spigraph, "Even though our two companies have been working on the same markets until now, the geographical and functional areas that have overlapped are minimal," he said. "This merger therefore represents a uniting of our respective forces."

Froning will stay with the company as Senior Vice President of Dicom/Spigraph Distribution.Wayne Davey, previously CEO of Spigraph, becomes CEO of the group. The group’s head office will be at Spigraph’s headquarters in Saint-Quentin-Fallavier.

The press release lists the combined company's turnover as €130 million, or approximately $175 million. In its final full fiscal year as part of Kofax (ended June 30, 2010), Kofax reported $125 million was generated from its hardware distribution business. When Spigraph acquired Swiss-German document imaging systems integration specialist ALOS in 2011, the combined entity's revenue was listed at over $65 million. So, there has apparently been erosion in revenue in the past couple years, which is not surprising considering the state of the scanner market today, which is how VADs have historically generated the majority of their revenue.

As prices and margins continue to drop on scanners and related service contracts, VADs, especially in more mature markets like North America and Western Europe, have had to look to new avenues to generate revenue. (Although VADs in emerging markets like the Middle East, such as Forefront Technologies seem to still be growing at a healthy rate.) Gessinger's software background is what made him attractive to the Dicom board, which brought him in. And, Spigraph, through its acquisition of ALOS, has a systems integration practice that helps further diversify that its offerings, which is a good thing.

Between the two organizations, Spigraph and Dicom will now cover a good portion of EMEA, including both mature and developing countries, with a single entity, that offers a combination of document capture-related hardware and software sales, support, and professional services. This variety and geographical infrastructure, along with the resources of a 400-person entity, should make the organization a more valuable asset to resellers and end users, as well as create more profits, than either company would be able achieve on its own.

DIR to Partner with Xamcor

You may have seen this press release that moved across the wire last week. From the article that appears in this week's premium DIR, "Xamcor [is] a leading M&A firm focused on the Information Management industry. DIR Editor Ralph Gammon will be providing content for the Xamcor Web site, including regular columns, executive interviews, and commentary on news releases.

"[I am] looking forward to helping Xamcor accomplish its mission of helping companies looking to be acquired receive maximum value for their entities, and, for those acquiring, finding good fits for their strategic plans. Xamcor was founded in 2012 by experienced ECM industry professionals Paul Carman and Harvey Spencer, along with Ike Fattal, who has a strong background in finance, deal structuring, and M&A."

I think that is all going to be fun, but, also check this out, which Xamcor apparently got with the issuing of the press release - yes, that's the Xamcor logo posted on a sign at Times Square. Cool.

From this Week's DIR: ECM as a Service and Enterprise Archiving

Here's a couple quotes that were thought were pretty cool from stories appearing in this week's premium edition of DIR:

From our story on the evolution of mobile scanner manufacturer Document Capture Technologies (DCT) towards more of a cloud-based services strategy: "“Basically, the goal is to take all the features of ECM and expose them as APIs that application developers can consume like any other service. This will change the economics of how ECM is delivered. Users will be able to pay as they go and add services.”

- Karl Etzel, COO, DCT

From a story on EMC's new InfoArchive enterprise archiving system: "Putting e-mail content in one silo and database content into another does not enable organizations to get their arms around all their information very effectively. InfoArchive represents a single unified archive that can support any unstructured content source and structured data source in one place. It’s a game changer in terms of providing full visibility into all information. It will enable next-generation solutions that are not isolated to leveraging one type of data.”

- David Mennie, EMC, IIG

Cool Stitching Feature in Kodak Alaris-HTI EOB Offering

Yesterday, Kodak Alaris announced it has teamed up with HTI Healthcare to offer an explanation of benefit (EOB) solution. The solution basically involves healthcare providers and third-party bill payers utilizing Kodak scanners and Capture Pro Software to feed HTI's system--which is a cloud-based EOB processing service. HTI then returns relevant extracted data to the providers and billers, along with - get this - "fully indexed patient claim 'stitched' images—a single image showing only the needed patient claim record, including all required EOB header information to identify the payer. Stitched images are a vast improvement over the outdated redaction process that left large gaps in the content of the document." We thought that was pretty cool. Bottom line is that it's good to see continued improvements in the evolving paper EOB processing market. 

Panasonic introduces new Departmental models

Panasonic flies under the radar a lot in the document scanner market, but they continue to come out with some impressive new technology. Check out these new departmental models (80 and 100 ppm, list price  $5,195, and $6,195) that were introduced this week.

An impressive list of features in the press release:

• ToughFeed: Stapled Document Detection, Ultrasonic Double-Feed Detection, Intelligent Feed Control and High Quality Feed Rollers ensure a smooth supply of paper into the scanner for efficient scanning.
• Mechanical Deskew: Physically adjusts and corrects the skew of documents before scanning by the paper feed mechanism to reduce the need for rescans.
• Paper Ejection Control: Paper exit roller reduces the speed of ejected paper and aligns it to prevent paper jams or the loss of originals.
• Hardware Image Processing: Performs image enhancements and prevents scanning speed degradation by maintaining workflow efficiency at 300 and 200 dpi
•  Auto-Preview / Auto-Rescan: Automatically produces nine different versions of a scanned document and displays them as thumbnails. Users select the most suitable image with a single click with no time loss. Similarly, users can adjust the quality of an image via the thumbnails without having to rescan the original thereby saving time and improving productivity.
•  Notification Function: Automatically detects problems with scanned images including binary/color, binary image, blank page and unique page detection using four notification functions and displays warning icons using Panasonic Image Capture Plus software.
• Additional productivity features include Automatic Glass Cleaning, Self Cleaning Ionizer, and One Touch Scanning for up to 100 programmable scanning workflows.
• The new models include Panasonic’s proprietary Active Double-Feed Roller Prevention, LED scanning illumination, Advanced Image Processing, and Image Capture Plus technologies (easy-to-use data formats, automatic image orientation and OCR Zone function).

Websocket to Replace NPAPI for Chrome Scanning

DynamSoft, the developer of the Dynamic Web TWAIN SDK for embedding scanning capabilities in Web-based applications, is in the process of developing a WebSocket solution to enable its customers' applications to continue to work with Chrome browsers. DynamSoft was forced to go this route due to Google choosing to no longer support NPAPI in its latest Chrome browser versions.

From a recent article provided by DynamSoft to DIR: "Google’s decision to no longer support NPAPI required a quick address by Dynamsoft. As a result, we at Dynamsoft have concluded we will leverage the WebSocket protocol to enable document scanning in newer non-NPAPI Chrome browser versions. The WebSocket protocol is part of HTML5 and the latest versions of Chrome support HTML5."

Read a full explanation of DynamSoft's WebSocket strategy for creating browser-based scanning.

DIR Top Stories of 2013: 7 thru 10

Here are the final three of our top 10 Document Imaging stories for 2013 as covered in DIR. (Here are links to posts on our top, second, and third, as well as fourth through sixth top stories):


7. Captricity Secures Round of Financing: Berkeley, CA-based ISV that specializes in automating data entry leveraging crowdsourcing, announced a $2.4 million round of financing led by The Social+Capital Partnership, a Palo Alto-based group founded by former Facebook executive Chamath Palihapitiya.

8. Kofax Hires New CMO; Former Kofax CMO Joins ReadSoft: Okay, it wasn't quite that cut and dried, but these hirings happened within about a month of each other. Former FileNet and Pagasystems executive Grant Johnson joined Kofax in October in the wake of the resignation of Martyn Christian. Then a month later, Andrew Pery, who worked as Kofax CMO from 2006-2010, joined ReadSoft full-time after working there as a consultant for almost a year. Additionally, in 2013, former ReadSoft Marketing Manager Alayne Pregeant joined TIS.

9. BancTec Lands Its Largest Scanner Deal Ever: This was a cool story as the Dallas-based imaging hardware, software, and service provider sold more than 30 high-volume scanners, through a reseller partner, to a Japanese shared services center. The kicker is that the center was opened in the Fukushima Prefecture, where a partial nuclear meltdown occurred in 2011, in the wake of an earthquake and tsunami.

10. TWAIN Working Group Launches Driverless Scanning Initiative:  Pam Doyle, Chair: "We are working on changing the conversation and taking out native drivers. We want to make the conversation occur directly between an application and a scanner. This will eliminate the need to develop drivers for multiple platforms.”

 

Top DIR Stories 4 thru 6: A Pair of Acquisitions & Flesh Eating Bacteria

Top DIR stories of 2013, numbers 4 through 6:

4. Hyland Acquires AnyDoc Software: Hyland, a BPM and ECM specialist with strong document imaging technology, had been developing its own advanced capture technology. It decided to ramp up its development efforts with the acquisition of forms processing industry pioneer AnyDoc. "We’ve been really pleased with the progress of our capture product," said Bill Priemer, long time Hyland sales exec who was promoted to CEO in 2013 with the retirement of A.J. Hyland. "But, we only had three years of development in advanced capture, which, by industry standards, gives us an application that is considered rather basic."

5. JBIG2 Compression Causes Major Headache for Xerox: The implementation of this advanced compression technology in Xerox's MFPs caused quite a stir when a German computer scientist found that it had altered the numbers on several blue prints he was scanning. One journalist went so far as to compare a “document-altering scanner” to “flesh-eating bacteria." This was probably an exaggeration, and the character changes apparently occurred only when more aggressive compression settings were turned on with smaller font and "stressed" documents. Nonetheless, Xerox eventually pulled non-lossless JBIG2 compression from its devices - kind of a bummer because the technology really has some tremendous document compression potential and is still utilized by many organizations through software implementations.

6. DocuWare acquires Westbrook: Westbrook was apparently up for sale due to some financials obligations by its principal owner - Allen & Co. Like AnyDoc, Westbrook was a pioneer in the document imaging industry, but had fallen on some tougher times recently. It did, however, maintain a strong relationship with Ricoh -  a partnership that was orginally formed with IKON more than 10 years ago. This relationship was very attractive to DocuWare, which has had much success in recent years through partnerships with MFP dealers, but did not have a formal relationship with Ricoh. Westbrook is currently operating as a wholly owned subsidiary of DocuWare.

Top DIR Story #3 of 2013: Another Strong AIIM Conference

Here's our third top story of the year for 2013 (DIR's Top and second top stories from 2013): 

3. Strong AIIM Conference - For the second year in a row, AIIM pulled off a very strong event. It drew more than 600 attendees and 30 exhibitors to the Hyatt Regency in New Orleans - representing a 50% growth over the previous year, when the initial event was held. Yes, there was an AIIM show for decades previously, but that show was sold by the trade organization in 2002 and was eventually re-branded as info360 in 2012, as AIIM pulled its branding. Along with its branding, AIIM also pulled its annual awards dinner - and all the executive power that it draws - and moved the gala to the site of its own re-booted conference.

The new AIIM Conference is not as ambitious in scope as the event that eventually became info360, but the new event has sold out both years (there are no "Show only passes), and AIIM is planning an even bigger conference for this year in Orlando, April 1-3. The plan is for the event to remain a hotel-hosted educational focused conference, but its success seems to have been enough to put the failing info360 event out of business - as the 2013 version of that event was cancelled.

We'll look forward to seeing quite a few of year in Orlando in a few months.

Second Top Story of 2013: ABBYY Beats Nuance in Court

In a case that went on for more than five years, ABBYY finally prevailed in a lawsuit related to OCR patent infringement. The case was heard over two weeks in August in a federal court in San Francisco. ABBYY was awarded a "clean sweep," in the words of its general counsel. "The jury found no infringement on any of Nuance's patent or trade dress claims."

Nuance had been seeking $107 million from ABBYY and its customer Lexmark. Nuance's claims were related to OCR patents that were filed for in the late 1980s and early 1990s and granted in the 1990s and and early 2000s. The case started with six patents in question, but was narrowed down to three by the time it came to trial - two of which Nuance had picked up in its 2000 acquisition of Caere.

ABBYY's defense was "non-infringement." The patents had been through a reexamination, so arguing
that they were invalid was not an option,” said LeighAnn Weiland, VO and general counsel for ABBYY USA.“If you look at ABBYY’s methods as compared to the very simplified processes in the patents that Nuance is alleging we violated, it’s very clear that ABBYY is not infringing. What Nuance has patented is analogous to building a bicycle, while we are building jet airplanes.”

There are not that many developers of OCR technology left on the market, but ABBYY's win was certainly a victory for those that are left, as well as end users - including those who utilize Google's Open Source OCR. Had Nuance won, we're assuming it would have gone after patent licensing agreements with everyone else in the market. And while Nuance still could go after patent infringement by other vendors (whose development methods presumably differ from ABBYY's), ABBYY is their biggest and most direct competitor, and this loss will certainly take the wind out of Nuance's sails - in addition to money out of its pockets that could be used for further litigation.

It's probably worth noting that Nuance's legal team for the case included outside counsel from Morrison & Foerster LLP, the same firm that represented Apple in its patent suit against Samsung. “We were up against the best of Silicon Valley,” said an elated Weiland. “It’s quite gratifying that our team could work like a little machine to convince a jury of what we believe are the actual facts of the case."

The verdict brought to an end an important case that we had been covering since 2008.

Sale of Kodak DI - Top Story of 2013

I apologize for being a few days late with this but I was busy enjoying holidays with my family, as well as dealing with living in the snowiest city in the U.S. so far this year: and yes, it is certainly coming down as I write the first draft of this post on Thursday evening (We're at 70 inches and counting- more than twice as much snowfall as Anchorage Alaska!). Anyhow, in between holiday cheer and bouts of flu and cold, I've been going over my annual article index for 2013, which will get published along with my 2014 predictions next week.

Going over the index is a great way to review the top stories and events of the previous year, which is inevitably leads to a top 10 list or something like that. For 2013, it seemed there were certainly two stories that stood out above all others, and maybe eight more that I thought were fairly significant.Today I'll share with you my top story in the document imaging industry from 2013 and follow up shortly with number 2, and the rest thereafter.

Without further ado, here is a summary of the top story we covered in DIR in 2013:

1. Kodak Document Imaging is acquired by the Kodak U.K. Pension Plan (KPP).

In a deal that was announced in May 2013, one of the leading players in our market was sold to an organization that is roughly the equivalent of an equity investor, but with a longer-term vision. Not coincidentally, KPP, which operates independently of Eastman Kodak, also happened to be Eastman Kodak's largest unsecured creditor. KPP agreed to pay Eastman Kodak $650 million in cash and non-cash considerations for DI and Kodak Personalized Imaging (PI), which combined generated $1.46 billion worth of profitable revenue in 2012. As part of the deal, Eastman Kodak was also relieved of $2.8 billion in claims that KPP had made against the bankrupt organization. So, in all Eastman Kodak received a potential net $3.45 billion for the two businesses, which KPP renamed Kodak Alaris, when the sale was completed in early September.

This brought to an end a saga which began in early 2012, when after months of rumors, Eastman Kodak filed for bankruptcy. Originally, DI was positioned as a "core business" that Eastman Kodak would hang on to help fund its emerging "growth businesses." That changed in August when Eastman Kodak realized it needed to sell more assets to pay off its creditors and get them to agree to the terms of its bankruptcy. Per bankruptcy laws, a formal process was put in place for selling DI that included accepting a "stalking horse" bid that would serve as a starting point in an auction.

The stalking horse bid came in April from Japanese manufacturer Brother, which offered $210 million, plus the assumption of $67 million worth unfulfilled service contracts for DI. However, that bid was trumped less than two weeks later by KPP's much higher bid for both DI and PI.

Just a few weeks after the sale to KPP was closed, the recently renamed Kodak Alaris DI put on its second annual Global Directions educational conference, where the keynote was noted author and futurist, and current Google Director of Engineering Ray Kurzweil. The event focused on a more software-centric future for Kodak DI. "In five years, we’d like to have at least one third of our revenue coming from software,” said Tony Barbeau, DI VP, products and services. “It could be higher depending on how much investment the organization makes. We could possibly choose to complement our organic growth through acquisition."

Barbeau and most of the Kodak DI management team, including President Dolores Kruchten, stayed on through the acquisition, so we don't expect any major shake-ups in the way DI will be doing business going forward. That said, everyone in the organization seemed relieved and somewhat elated that the sale to KPP was completed. They are looking forward to the opportunity to run free of the burden of their failing parent and the increased nimbleness and aggressiveness their new position should bring. We expect more exciting news from Kodak Alaris DI in 2014, but we're not sure if it can top the exciting events of 2013.