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Will Lexmark Split Their Company?
February 18, 2016
Today, The Recycler reported on a news story from Kentucky.com article that notes that the Lexington-headquartered company has in fact received some initial bids for the software side of its company which includes Perceptive Software, ReadSoft, and Kofax which work under the larger Lexmark umbrella. Initially the news was broken by Bloomberg following a sudden increase in the stock price of the publicly traded company. That said, company spokesman Jerry Grasso would not confirm or deny the news, but only remarked that the company "doesn’t comment on rumors or speculation".
Back in January, The Recycler reported on news Konica Minolta may be a suitor for the OEM, given its pattern of acquiring software companies, however Reuters noted that software makes up only a small portion of assets that drive revenue at Lexmark. Rather the big drivers for revenue from Lexmark come from the hardware. This past December, the analysis was proven as a lower demand for printers and cartridges reportedly impacted the bottom line of Lexmark.
Other indicators that a sale may be getting closer include reports from late December from the OEM to Reuters in an exclusive report indicating that possibility of breaking up hardware and software in order to make it more appealing for a sale. The report came from people considered to be "familiar with the matter", so there is likely at least some truth in what was suggested.
To this point, however, Lexmark has not had any offers that it considers to be in line with where they value themselves and have talked to various private equity firms about opting to acquire either its hardware or software assets. The company has not positively made any decision about its future to this point.
Given what is happening in the industry, it would not surprise us to see Lexmark split and sell a portion of its business. HP has already arguably successfully split into an Enterprise group that sells hardware, software and services and a personal systems group which now handles their PCs, printers, and ink. Also at the end of January, Xerox became the latest printer OEM to announce a split which is planned to be complete by the end of 2016. Xerox afterwards will have a new company set to handle anything related to document technology as well as a company that focuses on business process outsourcing.