In 2013, Lexington-based Lexmark International has spent more than $200 million acquiring companies that its chairman and CEO Paul Rooke hopes will help keep the business viable as much more than a company reliant on the use of ink and paper.
“Each of those had a very targeted reason to fit into our puzzle,” Rooke said.
In October Lexmark announced it had purchased Pacsgear, a California-based software company that focuses on medical imaging and document transfer, for around $54 million. In August, Lexmark acquired Germany-based software developer Saperion for a cash purchase price of approximately $72 million. There were also March acquisitions of San Francisco-based Twistage and Seattle-based AccessVia, for a combined investment of approximately $31.5 million, and in January, Lexmark purchased Acuo Technologies, LLC, a Minneapolis-based company that specializes in streamlining health-care imaging onto one system, for approximately $45 million in cash.
Each of these newly purchased businesses — with the exception AccessVia, which produces retail signage — now fall under Perceptive Software, a suburban Kansas City-based company acquired by Lexmark in 2010.
The role of Perceptive Software
The $280 million purchase of Perceptive Software was a major foray for Lexmark into its new mission of structuring data, the compartmentalizing of information into workflow and computerized business processes.
The battle against unstructured data — which can be a paper invoice, or even a digital one that is not capable of flowing easily through a payment system — has been the major push for Rooke since he took over for Paul Curlander first as CEO in late 2010 and as Chairman in the spring of 2011.
“While we’re investing organically to grow our capabilities, hardware and software, there are gaps, so these acquisitions reflect on some of the gaps we need [to fill],” Rooke said in an extensive interview with Business Lexington. “Some of [the companies we’ve purchased] have to do with technology; some of them have to do with deeper industry expertise.”
Perceptive Software had both.
“When we acquired Perceptive back in 2010, they brought a depth of health care and education that we didn’t have as much in, which was a nice complement,” Rooke said.
Lexmark went about looking at the industries they already had a strong foothold in with what is called managed print services (MPS), the streamlining of printing on shared devices as opposed to allowing employees to each have a desktop printer. The next step, finding hang-ups their customers continued to battle and looked to solve, proved fairly easy to find. The customers tended to come right out and ask for help in solving these problems.
“These are adjacencies for us. It’s not something we’re jumping out into left field to do,” Rooke said.
The MPS portion of Lexmark has earned multiple recognitions for the company as a leader in the industry by Gartner, an analyst firm. But this year Perceptive Software joined Lexmark in being lauded by Gartner as a member of the leader quadrant in enterprise content management solutions, the process of structuring data in a company’s computer system.
“But being named a leader in these segments is not the secret sauce — it’s how we put them together,” Rooke said. “Synergies, whether it be between imaging and Perceptive Software — that’s one synergy — but there’s also synergies within Perceptive.”
Growing those synergies has been a driving force in acquisitions.
“What we’re focused on is actually building the synergies between them, because the imaging engine here provides large account presence,” he said. “We’re in many, many Fortune 500 companies across the globe. Industry expertise, the cash that the imaging industry generates, all helps to fuel Perceptive. Vice versa, Perceptive, now with this fuel, is broadening their capabilities, which strengthens the managed print services and imaging business.”
As the growth of Perceptive feeds Lexmark, the Shawnee, Kansas-based Perceptive is getting extra attention from Lexington, as a new home office is currently under construction. The facility, which houses more than 1,000 employees, will feature a wellness center similar to a 13-month-old center at the Lexington headquarters to allow for quick treatment for acute health issues at the workplace, vaccinations and other medical needs.
How Lexington fits into the future of Lexmark
Despite the fact that Perceptive has kept its own brand, being labeled “Perceptive Software from Lexmark” on the company’s website, and has absorbed four companies in 2013 alone, it doesn’t mean Lexmark is looking to de-emphasize the importance of Lexington in the Lexmark corporate structure.
“Lexington is our headquarters; I see that remaining that way,” Rooke said. “We’re about 2,300 folks here in town. The mix of that has changed over time, from the early days of IBM to the beginnings of Lexmark and so forth; we’ve clearly moved from a heavy manufacturing site to a high-value white-collar site.
“What’s here is high-value, high wage-earning kind of jobs, either in headquarter functions or marketing and sales or technology, in both hardware and software. We see that mix continuing to strengthen,” he said.
But as the company continues to stress the need for cutting-edge software, Rooke said the company can’t focus on or force prospective employees to work in Lexington, Kansas, California or anywhere else they aren’t interested in.
“The challenge we have in the software business is in acquiring talent … if you focus on solely one location, it’s really hard. If you tried to solve all the software recruiting needs we had in Lexington or Kansas or wherever, it’s very hard. So having multiple locations to acquire a great software talent, whether it be in Lexington or Kansas or India or the Philippines or wherever it may be, it gives us actually a flexibility in a very competitive software market, which is a benefit to us,” he said.
All of the companies purchased by Lexmark have kept their home offices so employees do not need to relocate in order to stay employed by their new employer. That has given Lexmark and Perceptive new offices on the West Coast, in Minnesota and in Europe.
Being a 24-hour-a-day company is nothing new to Lexmark, as outposts in China, the Philippines and elsewhere have been longstanding. But now the company contracts its manufacturing while it has teams working on software stationed around the globe. In order for these teams to collaborate with their colleagues in vastly different time zones, teams will stay a few hours late to meet over videoconferences with teams that have arrived a few hours early in a different hemisphere.
In addition to the wellness center aimed at helping employees avoid burning the proverbial candle at both ends, Lexmark has also recently opened a child-care center for employees, which allows drop off as early as 7:15 a.m. and pick up as late as 6:15 p.m. from a newly constructed building on the east side of the company’s campus.
Both of these employee-centric facilities have opened since Lexmark announced it would shutter its inkjet printer division in August 2012, which resulted in the elimination of 1,700 jobs worldwide and 550 in Lexington. Approximately 350 of those jobs were full time, and the remaining were working on a contract basis.
The death of the Lexmark inkjet printer
Around 2008, Lexmark started pulling the plug on consumer-aimed inkjet printers, popular in homes. Home customers were printing less and less, and the attention was focused on selling the technology to small businesses, Rooke said.
As late as the end of January 2012, Lexmark announced a new line of small office-aimed inkjet printers, branded the OfficeEdge Series. The sleek black, multifunction printers boasted speeds to rival low-end laserjet printers at a lower upfront cost. Capable of 21 pages a minute for black and white and 14 a minute for color for the top-of-the-line OfficeEdge, the company showed pride in its new product leading up to its launch.
In the end the technology was there, Rooke said. It was a solid product; the market, however, had no demand for it.
“We finally concluded there wasn’t enough scale in that business to justify what it would take to keep it going, so we decided to pull the plug on the rest of it,” Rooke said about the decision seven months after the OfficeEdge’s release to exit the inkjet market entirely.
In April, Lexmark announced the sale of the inkjet division’s assets, including more than 1,500 patents and a Philippines-based manufacturing facility, to the Funai Electric Company of Japan for $100 million. Funai was a partner Lexmark had been working with in the inkjet field since 1997.
“Technology quickly changes,” Rooke said. “You can’t get too wed to something. You’ve seen it in desktops to laptops to mobile devices. … Printers are not immune to it.”
What’s to come
To keep the company in line with the future demands of business, Rooke sees Lexmark continuing to search for new companies to acquire.
“The acquisition element of our strategy is a part of our strategy, and it continues to be a part of our strategy,” he said of the company that, as of the end of the third quarter, had just shy of $1 billion in cash on hand around the world. “It’s not for the sake of growing revenue; it’s really part of an integral strategy to be the leader in this world of unstructured information. So we’re doing it with this very designed, defined strategy in mind, and that’s what really drives it.”