Hi thread and Don. I think the question for CAER is where is the growth going to come from? The combined Caere / Calera desktop OCR market share is something like 80%. So significant growth can't come from gains in market share. It can only come from either fast growth in the overall desktop OCR market, which is not happening, or from moving into other OCR markets beyond the desktop.
Currently, CAER's bread-n-butter business is the bundling of "lite" OCR with desktop scanners, in the hope that a significant percentage of scanner buyers will upgrade to the full-featured product. But CEO Bob Teresi just said in the last earnings announcement that they are falling short of goals in that area. Plain fact is, not that many people buy scanners in order to do OCR - they buy scanners to scan pictures of their kids to email to grandma.
There is another avenue for significant growth, however. It is the enterprise forms processing market, which is very different from the desktop OCR market. For a long time, Caere and Calera have been making noises about their commitment to enterprise forms processing. Lies, all of it. The OCR engines which CAER sells were never designed with the needs of the large-scale production forms processing market in mind. They were designed for OCRing full-page magazine articles and letters, not high-volume business forms. The features required are very different.
Caere / Calera do sell a hardware product into the high-end market, but the emphasis is on full-text OCR instead of reading individual fields from forms. The emphasis is also on speed instead of accuracy, which is all wrong. With the price / performance of Intel CPUs doubling every year, it makes no sense to install specialized hardware for OCR - just buy the software for $200 and run it on a PC.
CAER has an opportunity to attack the high-end enterprise forms processing market and create an entirely new area for growth. The reason this is significant is that margins in the enterprise OCR market are orders of magnitude higher than in the cutthroat desktop OCR market. It is not unheard of for desktop OCR vendors to OEM the "lite" version of their software for under a dollar a copy; at the same time high-end OCR products from AEG and PrimeOCR sell for $10,000 a copy into large production data capture installations.
CAER can make a bundle of money in this market. Ironically, their OCR is already present in many high-end installations, but they hardly capture any of the money at all. The integrators make millions, but CAER gets a few hundred bucks. But, by offering a different mix of features targeted to forms processing, CAER can turn a commodity technology into a very valuable product.
Will they do it? Probably not soon. There are a few experiments going on, but for now it seems clear that management's focus is on persuading the mom-n-pop scanner buyers to upgrade, which in my opinion is a losing proposition. Until the growth avenues for CAER are better defined, I expect a trading range between 5 and 10. |
