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Kofax Reports Strong Software Sales

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Just back from vacation, and it appears not a minute too soon, as the news reports have been rolling in. Yesterday, you probably saw that Kofax announced a strong second-half and 2010 fiscal year for software sales – saying year-end results will between $213 and $215 million. This represents over 25% growth from fiscal 2009, when Kofax reported $169 million in software sales. That’s a gross growth of some $45 million, at least half of which was organic. Kofax did acquire 170 Systems in Sept. 2009, and based on 170s trailing revenue of $28 million, maybe $20 million in growth can be attributed to that acquisition, but even a $25 million increase in software sales is quite impressive.

Kofax’s hardware distribution business did decline from fiscal 2009, but only slightly, as it’s projected to come in at $125 to $127 million, down from $129 million. Kofax CEO Reynolds Bish has always cited the hardware business as low-margin but profitable, and in the wake of the shortfall he seems to be cutting costs to maintain that profitability, as Kofax announced it will be eliminating 20 hardware redundancies (jobs?) to improve efficiencies.

Kofax clearly faces challenges related to its hardware business, but if it can keep growing the software business at 25% annually, the hardware business will continue to become a smaller and smaller percentage of overall revenue and eventually investors will stop paying attention to it.

Perhaps in answer to some of its hardware challenges, Kofax has announced that it will now be reselling IBML scanners in EMEA. If you remember, Bish had a lot of success reselling IBMLs when he was with Captiva. In fact, I believe at one point Captiva was IBML’s leading reseller.

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