Case 35 Deluxe Corp.

Deluxe Coporation is a large United States based firm that specializes in the printing of consumer and commercial checks and secure documents. The firm which is founded in 1915 is well established and currently holds nearly 50% of the check printing market share. As of the mid 1990s, the firm has recognized that electronic banking and payment instruments such as debit and credit cards are having a major impact on the check printing industry and can lead to a possible obsolescence of check usage in the near future. With a decline in check usage, Deluxe undertook a major reorganization which it divested non-strategic businesses and reduced its number of employees and facilities. The firm reduced its number of printing facilities from 62 to only 13. This change reduced its labor force from 15,000 to 7,000. Deluxe also outsourced its information technology functions, improved manufacturing efficiencies, and divested nearly 20 separate businesses. The reductions in operating expenses reversed Deluxe’s earnings slump in 1998 despite the continued weakened earnings growth.

In 2000, Deluxe made a major strategic shift with an IPO of its technology related subsidiaries, eFunds and iDLX Technology partners. Deluxe’s CEO Lawrence Mosner believed Deluxe had more shareholder value as a pure-play company. Mosner admitted the eventual demise of the paper-check business; he admitted that there were still growth opportunities for the firm. Analysts believed that the Business Services sector offered the firm with the best growth opportunities because the firm was able to sell products to growing small business industries where the firm was able to offer checks and documents to small businesses through financial institutions or by direct contact. There were also several smaller regional firms in the small business check printing industry that offered Deluxe with opportunities for strategic partnerships. Deluxe Corp. sales were 60% through financial services, 16%...