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 user 2007-05-03 at 11:39:00 am Views: 38
  • #18015

    Lexmark-Dell Partnership:A Cautionary Tale?
    didn’t have a great day. The Kentucky-based printer stalwart and
    perennial bridesmaid to Hewlett-Packard reported that first quarter
    sales were down 1 percent from this same quarter last year, decreasing
    from $1.28 billion to $1.26 billion. Worse yet, the company said that
    revenues for the second quarter also are expected to be down year on
    year by low- to mid-single digits. This news set of a sharp decline in
    Lexmark’s stock price for the day, with shares dropping by $5.66.Yes,
    the company attributed its lackluster showing to several factors,
    including smaller profit margins due to its aggressive price cutting on
    lower-end inkjet printers and a subsequent drop in inkjet supply sales.
    But perhaps the more ominous culprit is the weak OEM market — and for
    Lexmark, that means Dell more than any other OEM partner.

    Check this tidbit from Lexmark’s 2006 annual report:
    also sells its products through numerous alliances and OEM
    arrangements, including Dell, IBM and Lenovo. During 2006, 2005 and
    2004, one customer, Dell, accounted for $744 million or approximately
    15 percent, $782 million or approximately 15 percent, and $570 million
    or approximately 11 percent of the company’s total revenue,
    respectively. Sales to Dell are included in both the business and
    consumer segments.Fifteen percent means Lexmark’s fortunes are tied
    pretty tightly to Dell’s own. Printer sales go hand in hand with PC
    sales — especially on the consumer side, where Lexmark suffered the
    biggest drop in sales — and it’s no big secret how Dell has been
    sucking wind in the PC market of late.Which has me wondering … how
    many other technology vendors have cast their lot with Dell in one OEM
    deal or another? HP for notebooks? Samsung for monitors? If Dell’s
    performance goes south in any number of categories, it’s bound to trip
    up many of those manufacturers. And what might that mean to its channel
    partners ultimately?To be fair to Lexmark, the company released a raft
    of new higher-end products today and is in the midst of growing its
    portfolio of MFP and color laser printers to move with current trends
    in the market. These transitions take time.But might it also be time to
    think about diversifying its OEM relationships — or at least relying a
    bit less on Dell?

    Lexmark Hurt by Drop in Printer Sales
    International, hurt by declines in laser and inkjet computer printer
    sales, posted a quarterly profit yesterday that missed Wall Street
    estimates. Its shares fell nearly 9 percent.The company said that unit
    sales of inkjet printers fell 10 percent and laser printers were off 6
    percent. Sales of replacement supplies like ink were flat.Under
    pressure to improve its results, Lexmark said last year that it would
    reduce sales of unprofitable inkjet printers, a move that some analysts
    said would reduce the number of its printers on the market and cut
    sales of supplies, which reap a much larger profit than
    hardware.Lexmark said net income for the quarter rose to $92.4 million,
    or 95 cents a share, from $86.2 million, or 78 cents a share, a year
    earlier. Excluding one-time costs for revamping, profit was 96 cents a
    share, missing the average $1.03 forecast by analysts, according to
    Reuters estimates.Revenue fell 1 percent, to $1.261 billion, in line
    with the $1.26 billion forecast by Wall Street, according to Reuters