Issue #0902/2 – In the face of a weakening global economy and financial results over the last few years that have left much to be desired, Lexmark has, once again, revised its financial forecast to prepare shareholders for poor performance. The quarter in question is the fourth quarter of 2008 and full year results will inevitably also be impacted. A new round of restructuring will attempt to stabilise the company’s position.
Lexmark was forecasting a percentage decline in revenue for the fourth quarter of 2008 in the “low teens”. Now that the forecast has been revised to a decline of 17%, Lexmark will surely struggle to keep its head above water despite any restructuring plans it may have.
In order to avoid a collapse in revenue streams, every manufacturer must target volume printing, which means business printing (largely involving laser/LED hardware), with a view to capturing as many printed pages as possible and, thereby, as many supplies sales as possible. One way of achieving this goal, that has suddenly become a firm favourite, is Managed Print Services (MPS).
Most major vendors are pushing hard into this area, led by the likes of Xerox and Hewlett-Packard. One of the reasons for this surge in availability of Managed Print Services is that it turns the supplies business into an annuity stream and, furthermore, an annuity stream that is largely hardware-independent. It is an opportunity for any service provider to provide supplies and services to an organisation regardless of the brand of hardware in use and without having first to build an installed base of own-brand hardware. This is the enterprise battle-ground of the near future.
Consumer printing for its part, while not being irrelevant, will never be a high revenue earner and those companies with an inkjet line-up must present their products as business products with personal customers representing the icing on the cake, not the cake itself.
Therefore, the industry breaks into two main categories:
- those that have a strong presence in the business arena vs those that struggle to gain more than a few percent of market share
- those that own their technology vs those that buy hardware from an Original Equipment Manufacturer (OEM) and resell it under their own identity.
Lexmark should, in theory, be in a reasonably strong position on this basis because it owns almost all of its own technology (although a small number of products are bought in on an OEM basis and it has lost its OEM supply deal with IBM) and its financial results from the business sector have tended to be stronger than its consumer activities over the last five troubled years.
However, with reliability and quality issues running as far back as the company’s origins in the mid-1990s, many customers have become disillusioned with Lexmark and only either the most die-hard supporters, or the uninitiated, seem to be hanging on. Therefore, other issues are at work that will ultimately determine Lexmark’s future, issues that could absolutely rule out any long-term future for the company.
Manufacturers in the strongest position include:
- Hewlett-Packard – simply because of its historic longevity and the scale of its market share, despite the fact that it does not own its laser technology.
- Xerox – significant market share in enterprise copying and office printing, owns almost all its own technology (Fuji Xerox) and acts as major OEM for other vendors.
- Samsung – experienced phenomenal growth from a standing start over the last few years, owns its technology and acts as OEM for other vendors.
- Canon – one of the largest laser engine manufacturers (supplies Hewlett-Packard) with a strong presence in the MFP/Copier market.
When Lexmark’s fourth quarter and full year results for 2008 are published towards the end of this month, future TCPglobal articles will take a look at where the company stands. Once results for Hewlett-Packard and Xerox in particular (representing US manufacturers) are also available, we’ll also make some comparisons.
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