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Lexmark Buys German Enterprise Firm

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Renowned imaging and printing solutions provider Lexmark International Inc. (LXK) recently announced its acquisition of German enterprise firm Saperion, a leading developer of enterprise content management (:ECM) for a purchase consideration of $72 million in cash.

The acquisition will help Lexmark to evolve as a software and services company and diversify away from its traditional printing roots. Saperion’s ECM software makes highly scalable products that can be easily integrated with emails, ERP and document management systems.

Saperion simplifies the management of a large volume of information, reduces cost and smoothens the business process, thereby increasing its customer base and helping to garner additional market share. The newly acquired unit will not only strengthen Lexmark’s offerings, but also offer access to big customers such as Anadarko Petroleum Corp. (APC), BB&T Corp. (BBT) and British American Tobacco plc (BTI).

Lexmark’s decision to diversify into software and services follows a trend among major hardware providers, such as IBM, HP and Dell. The traditional printing market in particular has been in secular decline for quite some time and consumable supplies have largely moved to smaller local players. Considering the difficult market conditions and the company’s need to jumpstart its software business, Lexmark has resorted to a number of acquisitions over the past year.

Lexmark’s acquisitions have strengthened its Perceptive Software revenues. While lackluster demand for its legacy consumer products resulted in a revenue decline in the last quarter, this was mostly evident in the 5.0% revenue decline in the Imaging Solutions segment. Perceptive Software revenue on the other hand grew a whopping 41.0%.

Lexmark International is a manufacturer of consumer and business printing products, solutions and consumables. Its offerings include inkjet, monochrome and color laser printers, dot matrix printers and multi-function devices.

We see good growth prospects for Lexmark in the software sector although the company is also trying its luck in new hardware solutions. But the overall macro uncertainty could have an effect on product demand. Lexmark has a strong market position, but intense competition has led to a steep decline in hardware pricing in the computer peripherals market.

Currently, Lexmark has a Zacks Rank #3 (Hold).

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