Bitstream to Acquire Assets of Press-sense

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May 18, 2010

Yesterday, Bitstream, the developer of the Pageflex solutions suite announced it has agreed to acquire all of Press-sense’s assets for $6.5 million in cash.

For those of you that are not familiar with Bitstream, the company develops and sells a range of software technology including fonts, variable data publishing, Web-to-print, and more recently mobile Web browsers. The company, headquartered in Marlborough, Massachusetts, has been around since the early 1980s and has been public since 1996. Last fiscal year, Bitstream reported revenue of $21 million.

Press-sense, based in Or Akiva, Israel was started back in 2001. The venture capital-backed firm is known for its iWay product, a Web-to-print solution that has gained quite a lot of traction in the general commercial and digital printing markets, mainly attributed to its relationships with major digital printing OEMs such as HP, Océ, and Xerox, as well as reseller agreements with Presstek and InfoPrint Solutions.  Specifically, OEMs not only resell iWay, but also have rebranded and added further customization and integration to the product. For example, Xerox FreeFlow Web Services and HP SmartStream Director are developed on the core technology of iWay, but have value-added components specific to each vendors’ workflows, including connectivity with respective variable data publishing tools like XMPie and SmartStream Designer.  Thanks to these relationships, the company claimed more than 1,500 customers worldwide.

Unfortunately, broad OEM relationships and large customer base are not a guarantee for success, at least not for Press-sense. Earlier this year in March, Press-sense announced that its two major investors, Vertex and Evergreen, had ceased investment in the company. At the same time, existing investor, Plenus, has petitioned the Israeli court to appoint an Officer of the Court to direct Press-sense going forward. In short, the company was in trouble financially.

Since the news of financial trouble broke out, there had been speculation in terms of potential suitors for Press-sense. Major OEMs such as HP Indigo and Xerox were main candidates due to iWay’s role in their portfolio. However, if one particular OEM buys the company and its assets, it most likely ends Press-sense’s relationships with other existing OEMs. The next logical set of suitors were other software vendors in a similar space as Press-sense. Such a play not only provides access to technology, but also would sustain the OEM ecosystem and provide additional access to the much-valued OEM distribution channels.  Access to distribution (we argue) is worth as much as the technology to a software vendor in a very fragmented printing industry.

The $6.5 million price tag is a significant investment, especially coming off a tough year like 2009. For Bitstream, this amount represents about a third of its cash reserves. Still, the company does gain new revenue, access to additional channels, a large customer base, and expanded presence in the EMEA region. For partners and users of existing Press-sense products, it also means access to expanded support and professional services, which will likely be a welcomed change as the acquisition and integration of the companies moves forward.

In terms of product offerings, Bitstream’s Pageflex Storefront product essentially competes with Press-sense iWay in the Web-to-print software market. Pageflex Storefront’s capabilities have largely been focused on front-end processing, specifically with rich document customization and composition. The product has made strides with enabling back-end integration and connectivity over the past few years, and can be viewed as a platform for custom-developing storefronts. iWay also has some interesting front-end storefront capabilities, specifically with interface areas that can used for marketing purposes to suggest related products to users, but also has competencies for business management and back-end workflow.

It will be interesting to see what direction Bitstream takes with the development of the iWay product. Near team, we expect that Bitstream will enhance the iWay offering by adding support for its Pageflex VDP composition products to complement existing support for XMPie, SmartStream Designer, and GMC PrintNet Designer. There is also a longer term opportunity for further product platform integration between Pageflex and iWay products beyond composition to include support for things like launching multi-channel campaigns. Specifically, we may see more development related to support for additional media channels, including mobile and social networks as customers continue to expand their services beyond print.

Additionally, we expect expansion into Software-as-a-Service (SaaS) model. Bitstream has not utilized Software-as-a-Service (SaaS) as a delivery mechanism for its Storefront product, which could open up opportunity for use with a wider audience. Press-sense, through its partnership with Bay Digital, does offer a SaaS version of iWay called OrderSense, which Bitstream could further exploit and develop.

Overall, this acquisition presents opportunities not only for Bitstream and Press-sense, but also for OEMs and their customers that already rely on the iWay platform. Interestingly enough, this is the second M&A deal so far this year in the Web-to-print space. The first happened last month when Quark acquired Gluon, including its HyperPublishing System. Will this latest piece of news be a hint for more acquisitions in the future? It may, as the Web-to-Print market is fairly saturated with a large number of product offerings in the United States alone. InfoTrends’ Ultimate Guide for Web-to-Print Solutions has more than 25 vendors listed. As the market penetration for these tools grow, it will be hard for vendors to grow organically, hence a potential increasing appetite for acquisitions.

Note: Alex Sumarta co-authored this blog post.

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