Lexmark Acquires Two Companies To Support Growth In Cloud And Retail Solutions

by Trefis Team
-12.53%
Downside
45.98
Market
40.22
Trefis
LXK
Lexmark
Rate   |   votes   |   Share

Quick Take

  • Lexmark successfully completes acquisition of Twistage and AccessVia for $31.5 million
  • These acquisitions highlight Lexmark’s continued transition to being a solutions-centric company
  • Lexmark expands cloud platform with access to rich media content and signage solutions
  • The company expects combined growth of 15% in the MPS and Software division to offset the decline in the laser printer and cartridges vertical

Computer printer maker Lexmark International (NYSE:LXK) has acquired two new companies for $31.5 million in an effort to diversify and strengthen its presence in solution-centric business.

The first of these acquisition is Twistage, a cloud software platform for managing content that will supplement Lexmark’s Perceptive Software’s process and content management solutions. The second company, AcessVia, caters to retail printing space and will add to Lexmark’s portfolio of managed printing services (MPS). While Twistage will enhance Lexmark’s capability to capture, manage and deliver rich media content, AccessVia will increase Lexmark’s presence across the retail marketplace, with signage solutions to create and produce retail shelf-edge materials. [1]

The printer market is consolidating driven by economic uncertainty in Europe and intense competition from leading companies such as HP. Competition from manufacturers of larger, traditional copier machines is also increasing as companies adopt hybrid machines with multiple functionality. Consumers are refilling and reusing cartridges and imitators are cannibalizing further sales opportunities in the cartridge business line. This is impacting the hardware sales and pushing Lexmark to focus on MPS and Perceptive Software, which grew by 8% in the last quarter and offset slumping revenues in the laser printer and cartridges vertical. Lexmark has guided to a 15% increase in revenue in FY13 for both these divisions. We expect Perceptive Software and MPS to drive growth for the company in the coming years.

See our full analysis on Lexmark

Perceptive Software To Aid In Diversification And Drive Growth

Lexmark plans to become an end-to-end solution provider. Perceptive Software is becoming an increasingly important division for Lexmark and is helping the company manage the downturn in the printer and peripherals market. Perceptive experienced annual growth of 62% in the enterprise content management (ECM) and business process management (BPM) business. It also reported $162 million in revenues for FY12.

Lexmark expects ECM-BPM, a $8 billion industry, to grow at about 12% y-o-y. Lexmark  is focusing on building product portfolio through inorganic growth. Prior to the Twistage acquisition, the company completed four acquisitions (Brainware, ISYS, Nolij and Acuo) that will be integrated into Perceptive Software and will help drive the company’s software business. Lexmark has guided to double-digit growth in Perceptive’s revenue for the coming fiscal year. We also expect the seamless integration of Perceptive’s array of solution with MPS, to bolster revenue for the company in this division.

Managed Print Services To Drive Growth

Research firms such as Gartner and IDC rank Lexmark as the leader in MPS space. Companies are increasingly adopting Managed Printing Solutions to cut costs and simplify printer management. Lexmark acquired AcessVia, a web-based service, to offer cloud enabled MPS to its clients. Moreover, due to this acquisition, Lexmark has gained access to 75 retailers with 60,000 stores.

Service agreements tend to be sticky and MPS is a high margin business compared to selling hardware. MPS integrated with Perceptive’s solutions will deliver value to Lexmark’s growing client base.

Within Integrated Sealing Systems (ISS) division, MPS revenue grew 7% in FY12 while non-MPS revenue declined by 12%. We expect MPS to become the biggest driver of revenue in ISS division going forward.

We currently have a $29.62 Trefis price estimate for Lexmark, which is about 50% over its current market price.

Understand How a Company’s Products Impact its Stock Price at Trefis

Notes:
  1. Lexmark Acquires Twinstage and AcessVia, March 5 2013, newsroom.lexmark.com []
Rate   |   votes   |   Share

Comments

Name (Required)
Email (Required, but never displayed)
Be the first to comment!