- This topic has 0 replies, 1 voice, and was last updated 9 years, 9 months ago by
.
-
Posts
-
Lexmark Chief Sees Software Complementing Its Printer Business
By Drew FitzGerald
Printer maker Lexmark International Inc. (LXK), like others in the technology industry, has spent years wrestling with a maturing hardware market that drags down its top line.Unlike many of its competitors, however, Chief Executive Paul Rooke says the company can succeed by sticking to its core business and adding software around it. That approach is different from peers like Xerox Corp. (XRX), which have diversified further afield with new offerings, such as outsourcing.
Lexmark has spent the past three years focusing on software that helps companies scan and manage images like papers, records and media files that can’t fit so easily onto an electronic spreadsheet–everything from written job applications to surgery videos.
"We’re attacking this broader unstructured information problem," Mr. Rooke said in an interview following the company’s recent investor summit in New York. "Nobody is bringing all these diverse sets of content together in one place and connecting it into the core, other than Lexmark."
The pressure is on the Lexington, Ky., company to make its case to customers after revenue last year declined 9.1%, hurt by a 17% drop in hardware sales that drove sharply lower earnings. The International Business Machines Corp. (IBM) spinoff now faces some of the same headwinds that afflicted its former parent two decades ago–squeezed margins and weaker growth from developed economies.
The company this spring responded by divesting the last assets in its less-profitable inkjet printing business, selling patents, equipment and a manufacturing facility to supplier Funai Electric Co. (6839.OK) last month for $100 million.
Shares have surged 30% this year, outperforming the S&P 500 index as investors appear more bullish on technology companies. But the stock is still off 37% from its three-year high in 2010.
Analysts also remain skeptical of Lexmark’s long-term chances in light of the risks it faces. Raymond James analyst Brian Alexander said the company’s "nascent software strategy makes sense" but kept a neutral stance on its stock in a recent report, noting "the pathway to consistent growth and profitability remains uncertain."
Lexmark’s biggest recent acquisition, Perceptive Software, lends its name to division that has since collected several smaller software products all centered around creating or managing images.
The company on Tuesday set a 30% average growth target for the Perceptive Software suite, a goal that would deliver about $500 million of revenue a year to Lexmark’s by 2016. Much of that new revenue will come from more acquisitions, though Mr. Rooke said the company aims to keep its investment-grade credit rating, which constrains the size of possible future deals.
Printing hardware and supplies still drive almost 90% of Lexmark’s sales, so the company’s strategy calls for more acquisitions to eventually revive its top line.
"It’s a mature market, and it gets more mature every day," Mr. Rooke said. "While it’s still a large market–$70 billion worth, and still a lot of paper in the world–we think now is the time to get more aggressive."
- You must be logged in to reply to this topic.