During a conference call with media and analysts, Lexmark International Inc. announced its second-quarter results ending June 30. Paul Curlander, chairman and CEO of Lexmark, said the overall results for this quarter were disappointing since revenue declined two per cent compared to last year, from US$1.229 billion to US$1.208 billion respectively. In the business segment, revenue grew three per cent for the year, while the consumer segment decreased by eight per cent year to year. In an effort to turn things around, Lexmark has created a wireless printing plan in hopes it will increase revenue, especially in the consumer market space.“This is not the quarter we’ve expected,” Curlander said. “The consumer market segment is experiencing several problems. As we look ahead, we see the potential for continued erosion in inkjet end-user demand. We believe the shortfall in inkjet supplies revenue is due primarily to less than expected end-user demand. In the consumer market segment, we’re in a difficult position now.”
Analyst point of view
Brad Hughes, a senior research analyst at IDC Canada, based in Toronto, said at the end of 2006 revenue dropped in inkjets with consumers and in the MFP world with businesses.
“The value of inkjet MFPs shipped was down six per cent, while the value of hardware shipped to the commercial market was down 18 per cent,” he said. Hughes added that while Lexmark is still a big player in the retail market place, he notes the company has pulled back on their offerings of laser devices on retail store shelves.
“To place devices on retail shelves is a very expensive proposition,” Hughes said. “Lexmark Canada obviously made the business decision that to compete in that channel was not worth it.”
Paul Patterson, manager of marketing and communications at Lexmark Canada, refuted this statement.
“Lexmark has not exited Canadian retail,” he said. “In fact, we have launched some new wireless inkjet products that have been well received.”
Lexmark said the shortfalls in the consumer market segment at the end of the second-quarter was due to several factors such as a greater than expected decline in inkjet supplies revenue, a decreased average of unit revenue of inkjet hardware because of aggressive pricing, higher than anticipated inkjet product costs and higher than expected inkjet hardware unit sales.
“We’re seeing a continuing decline in our inkjet supplies and OEM unit sales,” Curlander said. “We need to grow our branded unit sales, but this has become more expensive than what we had anticipated. We need to drive forward our new initiative in wireless home printing and continue to invest in future products, technology and brand development.”
While Lexmark believes wireless printing is a smart move, Hughes does not remain as optimistic.
“Lexmark may be the first to announce this initiative,” Hughes said, “but our research finds that being on the leading edge doesn’t necessarily guarantee sales. What it really comes down to is reliability and price. It’s important to have a good name and quality product.”
