Lexmark International Inc. (LXK), leading imaging and printing solutions provider, expanded its Perceptive Software business with the acquisition of Toronto-based medical image technology provider, Claron Technology Inc., in an all cash-deal worth $37 million. The company funded the acquisition through its non U.S.-based cash.
However, per the agreement, Claron’s surgical navigation division will not be transferred to Lexmark and operate under the name Claronav. The company further stated that Claron will be integrated into Perceptive Software.
Claron offers web-based access to patient imaging which can be further distributed or shared with physicians, clinicians and specialists for reference and better collaboration thereby, improving patient care.
This is expected to strengthen the presence that Lexmark already has in the healthcare market. Over the years, Lexmark has acquired several health care technology companies including Acuo, PACSGEAR and GNAX, thereby expanding Perceptive Software’s medical content management strategy.
Further, Lexmark’s acquisition of ReadSoft during second-half 2014 bodes well as it will strengthen its position in the European business process management market. We believe that ReadSoft provides Lexmark the perfect footing to expand its business process solutions segment. It is expected to boost Lexmark’s Perceptive Software unit by generating $500 million revenues in 2016.
Nonetheless, we see the divestment of Inkjet business as a positive. Lexmark will now be able to focus more on Managed Printing Services (MPS) and the software business where growth prospects are better. Moreover, Lexmark is performing well in the MPS market with consistent deal wins.
We see good growth prospects for Lexmark in the software sector. However, the overall macro uncertainty could affect product demand. Lexmark has a strong market position but reduced demand for traditional printing hardware has impacted pricing in the computer peripherals market.
Though persistent pricing pressure from competitors such as Canon Inc. (CAJ), Xerox Corp. (XRX) and Pitney Bowes Inc. (PBI) and a high debt burden remain the concerns, we expect Lexmark to turn the tables with increased focus on software and services.
Currently, Lexmark carries a Zacks Rank #3 (Hold).
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