LEXMARK & DELL’s PARTNERSHIP………?

[Anonymous]

Lexmark-Dell Partnership:A Cautionary Tale?
Lexmark
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:
Lexmark
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
Lexmark
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
estimates.

[Author]

May 3, 2007 at 11:39 AM