(By Anthony Miller). Document capture and management player, Kofax, signalled another £2.2m in restructuring charges and 50 redundancies as first-half growth (to 31st Dec. '08) failed to meet expectations (see here). Both the software and hardware divisions saw revenues decline in constant currency (ccy) terms, dragging group revenues down 6% ccy to £90m. Operating margins fell from 7.9% to 5.3%. Part of the problem was that Kofax was rather blind-sided by scanner overstocking in its OEM business; this sounds like a ‘one-off’ rather than (we hope) a sign of more pervasive ‘channel stuffing’. These results make management’s double-digit revenue growth target look tough to meet, though CEO Reynolds Bish still expects FY results in line with “current” expectations.
These are tough times for Kofax, a 20-year veteran in the market. Despite analyst reports (not ours, I hasten to add!) indicating that the document capture market is likely to be more recession-proof than other segments, it’s pretty clear, as Bish reports, that the deteriorating conditions are in fact seeing scanner purchases weaken. Frankly, we don’t see this market as ‘non-discretionary’ spend, so we are not in the least bit surprised. Indeed, you only have to look at the recent trading statement from (much smaller) document management software player, Invu (see here) how sales cycles have lengthened in this market.