Friday, April 29, 2016

Lexmark ES Q1 Numbers Disturbing

For those of you that haven't done the math for yourselves, Lexmark Enterprise Software (ES) saw about a 15% decline in revenue for Q1, YOY. Yes, we realize Lexmark reported 60% growth for ES on revenue of $143 million, but last year's Q1 didn't include Kofax's numbers. In calendar Q1 last year (Kofax's fiscal Q3), the ISV did $75 million in revenue, and it also acquired a $9 million a year business in Aia Software towards the end of the quarter. So, we'll put Kofax's Q1 2015 revenue at around $77 million.

In the meantime, Perceptive Software, operating as a division of Lexmark, reported $90 million for the first quarter of 2015. If you put those two figures together, it gives you a Q1 2015 revenue number of $167 million, $24 million more than the two combined businesses reported this year for Q1 as parts of Lexmark ES. We don't have any insight into the breakdown of the Lexmark ES in numbers - in particular, how much was from generated in software sales, but we had heard rumors that Lexmark was struggling in that area in particular.

The 15% erosion in revenue is disturbing, and we hope it is not indicative of the industry's direction. We realize Lexmark has been struggling with integration issues, as well as uncertainty related to the recent sale of the company, so maybe the first quarter was an anomaly and the organization will bounce back strongly. That said, Lexmark's competitors are certainly trying to keep the FUD (fear, uncertainty, and doubt) levels pumped up, as I heard a lot of talk at the recent AIIM Conference related to the potential challenges of being owned by a group of investors from China.

In addition to Lexmark, Open Text failed to show organic growth in Q1 (its fiscal Q3), EMC's Enterprise Content Division (ECD) revenue continued to shrink, down to $134 million in Q1 2016 from $138 million in Q1 2015 (not to mention the fact that EMC is reportedly trying to sell ECD to help fund the Dell acquisition), and Top Image Systems (TIS) struggled in Q4 '15 with its Q1 2016 numbers still to come. It has not been all bleak news, as smaller companies like DocuWare and M-Files reported strong growth for 2015, and Hyland Software had another strong year as well.

What is somewhat interesting is that DocuWare, M-Files, and to some extent Hyland, are focused on the SMB space (Hyland stressing the "M"), while EMC, Kofax, and to some extent ReadSoft (also part of Lexmark ES) and Open Text are more focused on the enterprise space. So, maybe the growth in the ECM market is in the traditionally underserved SMB space (as we've been predicting would happen for years). This would certainly bode well for TIS, which recently put a stronger focus on shopping financial process automation to the mid-market.  Then again, the Perceptive Software's content management business is a major part of Lexmark ES and it focuses on the mid-market (we're really not sure how the individual components within the division made out).

When you add these recent ECM software struggles to the steady erosion we've seen in margins in the document scanner hardware market (as well as some of the reogranization at the leaders ), it makes us doubt the future of our industry. That said, the attitude at this week's AIIM Conference in New Orleans was not wholly pessimistic. There were plenty of optimistic vendors, a bevy of end users looking for solutions, and the usual group of energetic and imaginative people that combine to make our industry so exciting at times. New solutions stressing, the cloud, mobile, and emerging technology like natural language processing - as well as a new vision embracing enterprise content as data and thus creating a bridge for mainstream IT crossover, certainly created plenty of positive buzz at the AIIM event (or was that just the alcohol on Bourbon Street?). We'll have more details on what we learned at AIIM in the next issue of DIR.

In the meantime, let's hope for a stronger Q2 for everyone (well, except for your competitors in some cases, I guess.)




Thursday, April 14, 2016

Management Changes at Kodak Alaris IM

Word came out yesterday that Kodak Alaris Information Management has changed its management structure. C├íssio Vaquero, who had been serving as regional director of emerging markets (Asia-Pacific and Latin America) has apparently been appointed to a new head of global sales position. In conjunction with that, Martin Birch, Kodak Alaris' IM's regional manager for the US&C, and Erwin Schwarzl, regional manager for EAMER, have been let go. 

Here's a quote from Kodak Alaris on the shake up: "With the global integration of key business functions, including sales, within IM, we are transitioning to a new worldwide operational model. We thank Martin and Erwin for their contributions and wish them well in the future as we continue to help our customers grow their business using Kodak Alaris scanners, software and services."

The move is a bit surprising as Birch and Schwarzl have only been in their current positions for about a year. Last April, Birch, who was serving as regional director for EAMER, moved to the U.S. to take over for Russell Hunt, who retired. Schwarzl had been serving in another capacity at Kodak Alaris. Both Birch and Schwarzl worked at Kodak (and then Kodak Alaris) for several years.

These moves are part of a tumultuous few months at Kodak Alaris IM, which has also included some changes within its AI Foundry intelligent document recognition (IDR) software business.