LEXMARK SLASHES PROFITS ON WEAK INK SALES

[Anonymous]

Lexmark slashes profit view on weak ink sales
Jul 
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.
The
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.”

LExmark
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.

[Author]

July 10, 2007 at 12:26 PM