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AnonymousInactiveLexmark Misses Forecast, Stock Plummets
April 05NEW YORK-Lexmark International Inc. , the No. 2 U.S. printer
maker, on Tuesday posted quarterly profit that fell short of analysts’
expectations as the inkjet printer market entered a price war, sending its
shares to an 18-month low.
Lexmark’s woes follow an effort earlier this year by market leader
Hewlett-Packard to win market share by cutting prices for its printers, one
analyst said.
“HP had (previously) said that they were going to be far more aggressive in
pricing. It appears to have played out in Lexmark’s results and its guidance for
next quarter,” Shannon Cross of Cross Research said.
Lexmark Chief Executive Paul Curlander said that inkjet printer prices fell
about 15 percent to 20 percent during the quarter on strategic price changes,
not just from HP, but also from Canon Inc. , Seiko Epson Corp. and Lexmark
itself.
“Its hard to say who fired the first shot, and it doesn’t really matter,” he
told Reuters in an interview. “The reality is that it is very difficult to get
any advantage if everybody (cuts prices), and any market share you think you
pick up really isn’t sustainable.”
Printer makers earn little or no profit from hardware sales. But increased
printer sales eventually lead to sales of ink and toner, which reap higher
profit margins that reoccur for years.
Lexmark’s net income in the first quarter rose to $123.9 million, or 96 cents
a share, from $121 million, or 91 cents a share, a year earlier, fueled by
strong sales of replacement ink cartridges and laser printers. Revenue increased
to $1.36 billion from $1.26 billion, with supplies revenue up about 11 percent
and hardware up about 7 percent.
The results include one-time costs for probable losses related to accounts
receivable in Spain from 2002 to 2004 due to “inappropriate conduct” by a former
employee, and a tax benefit. Excluding these items, earnings per share would
have been 99 cents.
Analysts were expecting a profit of $1.02 a share on revenue of $1.37
billion, according to Reuters Estimates.
“The miss is notable given Lexmark typically sets the bar low enough to beat
numbers,” Merrill Lynch analyst Steven Milunovich said in a note to clients.
WEAK REVENUE OUTLOOK
Looking ahead, the Lexington, Kentucky-based company said it sees
second-quarter profit at $1.01 to $1.11 a share, with revenue growth up in the
mid single-digit range from $1.24 billion a year ago, while under continued
pricing pressure.
Analysts were expecting a profit in the second quarter of $1.11 a share on
revenue of $1.38 billion, which represents growth of about 11 percent, according
to Reuters Estimates.
Curlander said the company has abandoned an older strategy under which it
kept its prices less than those of HP.
“We gained a lot of share pricing under HP. I think that those days are
gone,” he said earlier on a conference call with analysts. “Clearly we have to
remain price competitive, but we need to bring more value and ease of use to
(future models).”
Shares of Lexmark fell $11.10, or 14 percent, to $67.65 in afternoon trading
on the New York Stock Exchange.
The weak outlook also weighed on shares of HP and Dell Inc., which resells a
rebranded version of Lexmark’s printers. HP shares fell 64 cents, or 3 percent,
to $20.46, while Dell’s shares fell 90 cents, or 2.4 percent, to $35.81.
Separately, Lexmark’s long-time Chief Financial Officer Gary Morin said he
will retire in the first quarter of 2006. A search for a new CFO is under
way. -
AuthorApril 27, 2005 at 10:38 AM
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