Irvine software maker Kofax PLC last week struck a deal to shed a lagging part of its business that distributed scanners and related devices—a holdover from the days when scanners were the latest and greatest technology.
Kofax is set to sell the division, which is run out of an office in southwest Germany, for about $23 million. German private equity firm Hannover Finanz GMBH is buying the business.
Hannover is set to own 80% of the business when the deal closes, which is expected in March. Managers now running the unit are set to own 20%.
The unit will change its name to Dicom International AG and be run by Joachim Froning, who has been senior vice president of hardware distribution sales at Kofax.
The unit has some 200 workers and sees yearly sales of roughly $130 million. It makes up nearly 40% of Kofax’s roughly $350 million in yearly sales.
Declining Business
The business—in which Kofax distributed devices made by Fujitsu Ltd., Eastman Kodak Co., Panasonic Corp. and others in Europe to smaller resellers—had been declining for a couple of years as scanners moved from a niche to mainstream.
“If you go back 10 years, that was a good business because many of the hardware products the company was distributing were proprietary devices from a variety of manufacturers,” Kofax Chief Executive Reynolds Bish said. “Over time, more of those technologies moved to the mainstream.”
Kofax also had a tough time competing as a distributor against bigger players in the market, such as Santa Ana’s Ingram Micro Inc. and Florida’s Tech Data Corp.
The move allows Kofax to focus on software, a growing, more profitable business.
“Over the past three years we have seen a great deal of revenue growth and increasing profits in our software business,” Bish said. “But in our hardware business we have seen slowly declining revenues and more rapidly eroding profits.”
Kofax makes scanning software used by businesses to get rid of paper and speed up productivity.
The software collects paper documents, forms, invoices, e-mails and photos, and organizes them into a searchable database of files.
Customers include government agencies, schools, banks and insurance companies, among others.
Restructuring
The sale of the unit is prompting some restructuring by Kofax in its Europe, Middle East and Africa operations.
The company is set to combine some jobs from those offices into one office in Switzerland. It plans to cut some 20 jobs, which is expected to save $2.5 million per year.
“Now that we have disposed of the hardware business we have an opportunity to change a few things in our remaining software business there to make it more efficient,” Bish said. “Rather than having accounting and other back office operations spread around 10 locations in Europe, we consolidated them.”
Kofax, which got its start in Irvine in 1985, has about 250 workers here and 1,000 in all.
The company is publicly traded in Britain, where its holding company parent was based for a time. The company officially moved its headquarters to Irvine—long Kofax’s operational base—in 2008.
The company is set to report results for the six months through December on Feb. 7. n
