Lexmark International (NYSE:LXK) has acquired Acuo Technologies, a software and services provider for clinical content management, data migration and vendor neutral archives, for $45 million. Acuo will be integrated with Perceptive Software, and this will give Lexmark a foothold in the fast growing enterprise clinical management software and services market. The combined entity will enable customers to deploy a single, enterprise-wide access platform for clinical content via any electronic medical record (EMR) system. 
Perceptive Software is becoming an increasingly important division for Lexmark and is helping the company manage the downturn in the printer and peripherals market. The company saw annual growth of 88% in the enterprise content management (ECM) and business process management (BPM) business and reported revenues of $41 million last quarter. It expects ECM-BPM, a $8 billion dollar industry, to grow at about 12% y-o-y and it provides solutions in this space with Perceptive Software, a provider of ECM and BPM. Prior to this acquisition, the company completed three acquisitions (Brainware, ISYS and Nolij), and these will be integrated into Perceptive Software, which will help drive the company’s software business. 
- Lexmark Earnings: Revenue Decline Across Printer Division Continues
- Lexmark Pre Earnings: Printer Revenue To Decline, Software Revenue To Report Growth
- Lexmark Earnings: Revenue Declines Less Than Expected As Merger And Delisting Seems Eminent
- Lexmark Earnings Preview: Decline In Revenue To Continue
- What Percentage of Lexmark’s Stock Price Can Be Attributed To Growth?
- Lexmark Earnings: Revenue Declines More Than Expected
Managed Print Services And Perceptive Software To Drive Growth
Lexmark is the leader in MPS according to research firms such as Gartner and IDC. Companies are increasingly adopting Managed Printing Solutions (MPS) to cut costs and simplify printer management. Service agreements tend to be sticky and MPS is a high margin business compared to selling hardware, and we expect this to become the biggest driver for Lexmark, going forward.
The printer market is consolidating driven by economic uncertainty in Europe and HP is becoming a leader in this space. There is a lot more competition from manufacturers of larger, traditional copier machines as companies adopt hybrid machines with multiple functionality. Consumers are refilling and reusing cartridges, and imitators are eating away further sales opportunities in the cartridge business line. This is impacting hardware sales and pushing Lexmark to focus on MPS and Perceptive Software.
Imaging solutions and services (ISS) revenue declined 13% y-o-y to $879 million. This was mainly due to the restructuring efforts by Lexmark to shut down the ink-jet division. Within the ISS division however, Managed Print Services (MPS) revenue grew 2%, Non-MPS revenue declined 12% percent and Inkjet Exit revenue declined 29% y-o-y.
We currently have a $32.76 Trefis price estimate for Lexmark, which is about 50% over its current market price. Perceptive Software is the second most valuable division for Lexmark, accounting for nearly 15% of its value.Notes: