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 user 2007-07-27 at 2:32:00 pm Views: 37
  • #18473

    Is Lexmark Spending Enough On R&D To Beat HP?
    , 2007Lexmark Chairman and CEO Paul Curlander Tuesday defended his
    company’s spending on research and development compared to rivals like
    Hewlett Packard.Curlander’s comments came as he acknowledged Lexmark
    suffered a “disappointing” second quarter, during a conference call
    with Wall Street analysts to talk about Lexmark’s earnings.Richard
    Gardner, an analyst with Citigroup, New York, questioned Curlander
    sharply over Lexmark’s R&D compared to rivals and even asked
    whether the company had to make some “tough decisions” about its
    flagging inkjet business.”I was wondering if you would acknoweldge a
    big problem in (Lexmark’s) inkjet (business) is lacking print-head
    technology,” Gardner said. “Given that your competitors are spending
    five and 10 times as much on inkjet R&D technology as you are, I’m
    wondering how you can atch up at this point, cost-effectively, and, as
    you say, spend as much as you need to spend on R&D to get back to
    where you’d like to be in the consumer segment?”"And, if that’s
    impossible, why not just make some tough decisions about that
    business?,” Gardner asked.

    Lexmark, which reported
    second-quarter earnings Tuesday that showed declines in revenue and
    earnings, blamed much of its recent softness on slow sales of both
    inkjet printers and inkjet printer supplies. At the same time, rival
    Hewlett-Packard, Palo Alto, Calif., has een aggressively integrating
    its proprietary print-head technology into its inkjet devices to
    increase performance and push pricing down. Curlander, in response to
    Gardner, defended Lexmark’s R&D and technology spending.”I would
    tell you, clearly, we are focused on improving our technology in the
    products,” Curlander said. “The comments you make about competitors
    spending more on technology than Lexmark – - those are correct but
    that’s not a new situation for Lexmark. Since the company started in
    1991, we’ve always faced significantly greater investments by the
    competition than we’ve been able to afford. And the way that we have
    survved, the way that we have succeeded and competed is we’ve focused.
    We don’t try to do everything the competition is doing.”Among other
    things, though, Lexmark recently began integrating wireless
    capabilities into some of its consumer printers, betting that un-wired
    printers would become a key point of leverage in the market.Curlander
    said HP, the marker share leader in the printing space, is pushing its
    inkjet technology into segments including light production and
    wide-format priting. Lexmark is focusing on driving its inkjet business
    into the consumer space. Curlander brushed off the suggestion that
    Lexmark get out of that segment.”Relative to how we see the inkjet
    business – - obviously we’re disappointed with the result we’ve had
    here,” he said. “We’re not happy with where we are relative to
    profitability. But we do believe, long-term, that inkjet can be a
    profitable contributor to Lexmark. It has been in the past.”

    Hicks, CEO of Electronic Business Machines, a Lexington, Kentucky-based
    solution provider and Lexmark channel partner, said his business not
    focused on the inkjet segments. “Personally, I know they would like for
    us to sell more,” Hicks said. “I don’t worry about that aspect of it.”
    Hicks said he is more focused on commercial-grade, color laser
    technology – - an area where Lexmark did not see the softness it did in
    its inkjet business. And, Hicks said, he believed the company was
    correct in continuing aggressive price promotions on some product lines
    - – promotions that he believes helps smaller solution providers such
    as his company.”These 25-percent off MSPs (Manufacturer Suggested
    Prices), 50-percent off a couple of targeted models – - that helps me
    drive business,” Hicks said. “I can do marketing campaigns behind that