Lexmark’s Bid for ReadSoft Marks a Leap Forward for Company’s Software Business

by Robert Palmer | 5/7/14

Lexmark announced on Tuesday that it has made a $182 million cash bid to acquire Sweden-based software company, ReadSoft. According to Lexmark, ReadSoft’s Board of Directors has unanimously recommended to accept the offer. 

Readsoft founders and two largest shareholders, Lars Appelstal and Jan Andersson have also agreed to the bid. The offer is contingent on a variety of factors, including acceptance by shareholders representing more than 90 percent of the total number of outstanding shares of ReadSoft, Combined, Appelstal and Anderson hold about 64 percent of ReadSoft’s total outstanding shares.

Upon successful completion of the deal, Lexmark expects to combine ReadSoft with its Perceptive Software business—a move that would grow Lexmark’s software business significantly while expanding its geographic reach. Lexmark says that ReadSoft’s technology and market presence will also complement its Perceptive Software business, strengthening its position as a leading provider of intelligent data capture software solutions for back office processes.

ReadSoft is recognized in the industry for its workflow automation solutions that integrate directly into existing ERP systems such as SAP and Oracle. Its solutions include applications for invoice processing, accounts payable automation, and sales order processing. Its software also automates a wide variety of business processes that include claims, applications, and questionnaire processing across a number of targeted industry segments.

Our Take

The deal with ReadSoft provides some interesting perspective to Lexmark’s Q1 financial results announced on April 22. While revenue and profits were down compared with the year-ago quarter, the bright spot for Lexmark clearly came from its MPS and Perceptive Software businesses, which together the firm is now positioning as its “Higher Value Solutions Portfolio.” Combined revenues from MPS and Perceptive Software climbed 18 percent year-over-year and now account for 28 percent of Lexmark’s total revenue, compared with 23 percent in Q1 2013. More importantly, Lexmark is projecting revenues for its “Higher Value Solutions Portfolio” to grow by 15 percent and exceed $1 billion in 2014. (For more on Lexmark’s Q1 results, see article in The Imaging Channel’s Analyst Corner).

Obviously, the ReadSoft acquisition is a big part of the projected growth for Lexmark’s software business and its overall long-term outlook. ReadSoft is a leading provider of on-premise and cloud-based software solutions for automating business processes. Lexmark has outlined a very compelling strategy aimed at assisting customers with the challenge of dealing with the massive amounts of unstructured information in today’s office environment. Adding the ReadSoft portfolio of solutions to the core set of content and process management solutions already in place with Perceptive, Lexmark can extend that value proposition even further.

Strengthening its software business provides a number of benefits for Lexmark by driving non-print-related revenues, reinforcing its competitive position in the office-printing market, and shoring up its core hardware/supplies revenue. Like every other hard copy OEM, Lexmark is deep in the midst of business model transformation with the traditional print market under attack by numerous outside forces.

At the same time, the firm’s growing software portfolio clearly bolsters Lexmark’s position in the MPS space. With integrated solutions for intelligent capture and routing, content management, process management, workflow automation, and related BPO, Lexmark can help customers shift the MPS conversation from reducing print costs to optimizing business processes. This provides significant competitive advantage for Lexmark and helps to reposition MPS customer engagements on high-value solutions and services as opposed to the lowest possible per-page contract rate.

Robert Palmer is chief analyst and a managing partner for BPO Media, which publishes The Imaging Channel and Workflow magazines. He is an independent market analyst and industry consultant with more than 25 years experience in the printing industry covering technology and business sectors for prominent market research firms such as Lyra Research and InfoTrends. In December 2012 he formed Palmer Consulting as an independent consultancy focused on transformation, mobility, MPS, and the entire imaging market. Palmer is a popular speaker and presents regularly at industry conferences and trade events in the U.S., Europe, and Japan. He is also active in a variety of imaging industry forums and currently serves on the board of directors for the Managed Print Services Association (MPSA). Contact him at robert@bpomedia.com.