Of course, immediately upon announcing its Q3 numbers last year, Lexmark announced it was looking at selling either the whole or parts of its company, which sent the ES business into a bit of a tailspin. Things bottomed out in Q1 of this year when Lexmark reported ES revenue of just $143M, a 14% decline from the combined revenue of Lexmark's Perceptive Software and Kofax (which were combined to create Lexmark ES) in Q1 2015.
So, it's good to see that now Lexmark's ES business appears back on track in spite of April's announcement that the entirety of Lexmark was being acquired by a group of China-based investors led by Apex Technology Co., Ltd. and PAG Asia Capital. A week previous to the Q2 earnings announcement, it was announced that Lexmark shareholders had approved the "merger agreement." There was a lot of speculation that being owned by a Chinese entity could adversely affect enterprise software sales due to concerns about security related to a lack of regulation in China. In my research and conversations, I could find nothing to substantiate these concerns and apparently they didn't negatively affect sales in Q2.
I'm not exactly sure what led to the turnaround from Q1, except that perhaps once the deal for the acquisition was in place, the ES team was better able to focus on its business. ES President Reynolds Bish had told me in a conversation at Lexmark ES's Inspire event in early April, that the distractions related to a potential acquisition had taken a toll on his organization.
Of course, rumors continue to swirl that Lexmark ES will still be spun off and a decent quarter like Q2 should help increase its potential value. Although it's still hard to see Lexmark recouping the approximately $2B in spent rolling up ES in the six-year period from 2010 through 2015.