LEXMARK’s SHARES FALL 4%

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LEXMARK’s SHARES FALL 4%

 user 2006-07-27 at 11:57:00 am Views: 51
  • #16282

    Lexmark’s shares fall 4% on earnings,
    But 2nd quarter of last year was better
    Lexmark
    International announced second-quarter earnings yesterday that were
    markedly higher than Wall Street expected and included optimism about
    its strategy of developing printers for high-growth market segments.
    But the earnings continued to reflect the company’s struggle since last
    year.Revenue for the quarter was $1.23 billion, down from $1.28 billion
    in the same period a year ago.The company earned $76.7 million in the
    quarter, compared with $79.9 million in the same quarter in 2005.The
    drop in earnings and revenue appeared to dampen the enthusiasm of
    investors, as shares of Lexmark (LXK: NYSE) fell $2.26 to close at
    $50.52.Earnings per share this quarter were 74 cents but would have
    been $1.07 a share had it not been for a restructuring charge of 35
    cents a share and a tax benefit of 2 cents a share. The earnings were
    far higher than the 70 cents to 80 cents a share, excluding one-time
    charges, that the company forecast in April.Earnings per share in the
    second quarter last year, excluding a one-time charge, were $1.06.The
    higher earnings per share occurred because Lexmark has substantially
    reduced its number of shares outstanding in the last year, from about
    125 million to 104 million.The company said it repurchased $300 million
    of its stock, or about 5.7 million shares, in this past quarter.The
    company attributed the stronger earnings to improved gross margins,
    primarily because Lexmark sold fewer inkjet printers, which typically
    have lower margins than laser printers.Chief Executive Officer Paul
    Curlander told analysts yesterday that the company is continuing to
    spend more on research and development, up more than $10 million in the
    past quarter compared with a year earlier, to aid its strategy of
    developing printers for high-growth market segments.Chief Financial
    Officer John Gamble said Lexmark’s efforts so far have been
    successful.”We’ve seen some good progress for those products, as well
    as good reception for those products from the press and the market. We
    feel good there,” he said.

    Revenue for the company’s business
    segment, focused on laser printers, was $713.2 million, up 1 percent
    compared with the same period in 2005. Revenue for the consumer
    segment, focused on inkjets, was down 10 percent to $515.8 million.
    The
    company said the number of inkjet units sold declined 25 percent,
    reflecting drops in the sales of Lexmark printers packaged under other
    brand names as well as Lexmark-branded single-function inkjets. It said
    sales of all-in-one printers, which include scanning, copying and
    sometimes fax functions, grew.Revenue from sales of supplies was down 1
    percent from a year ago, the company said. Printer hardware revenue, as
    a whole, was down 7 percent.The declines come as the company walks away
    from a portion of its inkjet sales, primarily bundles in which the
    company’s printers were either given away or sold at little cost to
    consumers who did not buy enough ink and supplies over the life of the
    printers to meet profit expectations.Lexmark began experiencing
    problems in the latter half of last year after its competitors slashed
    prices on printing hardware and the company was slow to respond. During
    the same time, the growth of Lexmark’s sales of supplies, such as ink
    and toner, began to slow.In January, the company announced a
    restructuring plan that would eliminate or transfer 1,350 jobs,
    including as many as 200 in Lexington, to countries where wages are
    lower. The majority of the restructuring in Lexington has already taken
    place, said spokesman Tim Fitzpatrick.The restructuring was reflected
    in yesterday’s earnings announcement — the 35 cents-a-share charge –
    and will also be reflected in third-quarter earnings.Looking forward,
    the company said it expects third-quarter earnings per share to be 65
    cents to 75 cents, excluding a charge of 16 cents a share related to
    the restructuring.Included in the forecast is a reduction of 5 cents a
    share because of an inkjet printer component shortage. The company said
    the issue “is now largely resolved” but will affect earnings,
    “primarily for incremental air freight to expedite product delivery.”
    The company expects revenue to be flat to down in the low-single-digit range compared with a year ago.