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 user 2007-07-10 at 12:26:00 pm Views: 32
  • #18355

    Lexmark slashes profit view on weak ink sales
    2007 NEW YORK  – Computer printer maker Lexmark International Inc.
    slashed its second-quarter earnings outlook on Monday, citing
    disappointing revenue from inkjet printers and cartridges, and its
    shares fell as much as 12 percent.

    warning is another disappointment from Lexmark, whose stock has tumbled
    since it released weak quarterly results in April.The news also came on
    the same day as a profit warning from recording disc and tape maker
    Imation Corp. , which forecast lower-than-expected second-quarter
    revenue and said it would cut its full-year outlook on softer demand
    and pricing pressure.Lexmark, which competes with Hewlett-Packard and
    counts Dell Inc.  as one of its biggest customers, said it expected
    second-quarter earnings of 64 cents to 69 cents per share. The midpoint
    of that range is about 24 percent lower than that of the previous
    outlook of 82 cents to 92 cents.Excluding restructuring benefits,
    Lexmark said it saw earnings of 62 cents to 67 cents a share for the
    quarter. That was far short of the average Wall Street forecast of 86
    cents, according to Reuters Estimates.

    Both earnings forecasts
    include an expected tax benefit of about 5 cents a share, Lexmark said
    in a statement.The warning comes as Lexmark is in the midst of a plan
    to reduce sales of unprofitable inkjet printers and invest in printers
    with more competitive features, such as wireless connections. It is
    also boosting spending on “demand generation” activities such as
    advertising and promotion.Cross Research analyst Shannon Cross said
    that shift was partly to blame for the warning.”The results are
    consistent with our belief that Lexmark’s strategic decision to walk
    away from ‘unprofitable’ low-end inkjet units would ultimately impact
    its supplies revenue,” Cross said in a note to clients. “In addition,
    we believe Lexmark’s consumer business is being impacted by a mix shift
    to lower (priced) products.Lexmark pegged the earnings shortfall to
    weak sales of inkjet supplies, including a shift to lower-priced
    “moderate use” cartridges, and lower per-unit revenue from hardware,
    driven by aggressive pricing and promotion and larger-than-expected
    product costs.The company added that the same pressures would affect
    its third-quarter results. It forecast earnings at around break-even to
    10 cents a share, while analysts on average had expected profit of 81
    cents.”Ultimately, to improve inkjet supplies sales we need to drive
    more sales of inkjet units,” Chief Executive Paul Curlander said on a
    conference call with analysts. “We are in a difficult situation.”While
    unit growth is good, he added, “it’s costing us more to drive it.”

    said it expected second-quarter revenue to decline about 2 percent from
    a year earlier.According to Reuters Estimates, analysts on an average
    were expecting revenue of $1.21 billion, which would be a decline of
    1.6 percent.Shares of Lexmark were down $3, or 6.1 percent, at $46.40
    in morning New York Stock Exchange trade after sinking to $43.50, their
    lowest level in 20 months.