Friday, October 23, 2015

Lexmark Apparently for Sale

Today, Lexmark announced that its Board of Directors has "authorized the exploration of strategic alternatives to enhance shareholder value." After the announcement was made, Lexmark's stock rose more than 6% (as of this posting), lifting the company's market cap to $2.1B. This is not that great of a valuation for a company that bills itself as a "$3.7B global technology company that includes a $1.5B Higher Value Solutions business comprised of Enterprise Software (ES) and Managed Print Services (MPS)."

That Enterprise Software business, of course, includes Perceptive, Kofax, ReadSoft, Brainware, and some other ECM-focused companies that have been rolled up since 2010. Most recently, Lexmark acquired Kofax for $1B in a somewhat surprising deal. It followed up by appointing Kofax CEO Reynolds Bish as president of Lexmark ES, which has about a $700M annual run rate.

Unfortunately, investors were less than thrilled with the guidance Lexmark presented for its overall business in conjunction with its Q2 earnings report, which dropped the company's valuation by 20% on a single day in July. Although the stock has bounced back slightly over the past few weeks (including today), it is still trading at more than 25% below its July peak.

Lexmark has made a concerted effort to shift its business from hardware-centric to a software and services focus, stressing its growing ES and MPS revenue. Unfortunately, it appears that investors are still valuing the company based on its declining hardware and supplies revenue. Stated Jean-Paul Montupet, lead director of the Lexmark Board of Directors, in relation to this, "We are extremely proud of what the Lexmark management team and employees have accomplished in the transformation of Lexmark. While the Board is encouraged by the company's future prospects, the Board does not believe Lexmark's current share price fully reflects the intrinsic value created by the company, and the Board has concluded it is appropriate to explore strategic alternatives as the next step to unlock this value."

What specifically those strategic alternatives are is not mentioned, but speculation is that the company could be sold either to a private equity company or another high-tech company. HP, which had long been discussed as a possible landing point for Kofax and has a partnership history with Lexmark, is one possible buyer. However, to me, a private equity buyout at this point would seem to make more sense. After all, less than six months ago, Lexmark paid $1B to pick up Kofax, so selling the whole company to someone else for anything close to its current market valuation would seem unlikely. After all, Kofax was a $300M-plus company and Lexmark is a $3B-plus company. The math just doesn't make good sense.

What makes more sense is to take the company private, which would conceivably enable those who agree with Lexmark's management's transformative vision to stay on board as investors. The company would then be able to work on really affecting the changes it wants to without the worry of meeting quarterly numbers - which are going to be very hard to meet as the formerly hardware-driven company de-emphasizes hardware. When the transformation is complete, and Lexmark is operating as primarily a software and services business, it can then go public again, conceivably with a more favorable valuation.

At least that's the way I see it shaking out.

Your thoughts?

Thursday, October 15, 2015

German Start-Up Developing Unit for Smartphone Scanning

Here's a preview of an article that scheduled to run in tomorrow's (Oct. 16) edition of DIR:

scanPAD is a German startup that has created a new apparatus designed to enable smartphones to act as document scanners, mini photo studios, and even overhead projectors. According to a press sheet, the scanPAD leverages patent-pending nanotechnology to hold and stabilize smartphones, as well as documents. Shaped like a desklamp (see image), the scanPAD holds a smartphone in place above whatever the user is trying to capture. 


For documents, the base of the scanPAD has a microsuction surface designed to not only hold documents, but also smooth and flatten them. It is designed to work with whatever document capture app a user has installed on their phone. The reverse side of the microsuction pad features a bluescreen that enables users to take pictures with a transparent/replaceable background. The device can also be used to give video presentations utilizing printed pages or whiteboards.  

The scanPAD carries a retail list price of 249 Euros, or about $283US. There is a Kickstarter campaign underway, with a goal of raising $113,000 over the next two months. As of mid-day yesterday, 40 backers had pledged $6,500. Pledges of a certain amount get the pledger a discounted scanPAD in return. Manufacturing is scheduled to begin in Germany in January with units to begin shipping in February. 

I believe this is the third device we have covered in DIR designed to hold a smartphone to create higher quality scans. The last one was the Scandock from Atiz, a company headed by former Apprentice finalist Nick Warnock. Atiz’s Scandock lists for slightly more than the scanPAD but also offers a lighting system and software designed to ensure high-quality color images are produced. 

Added for blog: Would it make sense for someone to create an ADF version of this type of scanner? Along those lines how fast could you capture images, say, leveraging the video camera within a smartphone or tablet? Could you do it ibml fast if you had the right transport? Just some food for thought.