Lexmark Announces Its Exit in the Inkjet Business

September 6, 2012 No Comments

Lexmark LogoLexmark International finally announced their final decision upon exiting the inkjet business by the end of the year 2015. On August 28, Lexmark Chairman and Chief Executive Officer Paul Rooke stated “Today’s announcement represents difficult decisions, which are necessary to drive improved profitability and significant savings. Our investments are focused on higher value imaging and software solutions, and we believe the synergies between imaging and the emerging software elements of our business will continue to drive growth across the organization.”

This restructuring plan is expected to accumulate an estimated savings total of $85 million in 2013, possibly increasing to $95 million in the beginning of 2015. The restructuring actions includes the closing of its Cebu, Philippines inkjet supplies manufacturing site, eliminating 1,700 positions worldwide, including 1,100 manufacturing jobs. Lexmark also stated that it is working with its strategic advisors to explore the sale of its inkjet-related technology.

Although considered to be one of the pioneer in the inkjet manufacturing field, Lexmark’s decision didn’t came as a surprise and perhaps was already foreseen due to the company’s news and announcements concerning the decrease of their inkjet printers and supplies sales.

The restructuring plan basically intends to “to cut costs and simplify printer management” which are expected to result “to result in $160 million in pre-tax costs, with $110 million of that in 2012, $30 million in 2013 and the rest in 2014 and 2015.” With it comes its announcement to increase “its stock repurchase plan by $100 million, boosting the total current authorization to $251 million.”

Lexmark International Inc. will refocus onto its software services and Managed Printing Solutions wherein the company is considered as the industry leader in the said segment, and a high margin business compared to the inkjet hardware sales. Lexmark thus expect its growth along with its laser printers and toner cartridges.

According to Trefis, “Lexmark expects the enterprise content management market to be a $8 billion dollar industry, with a 12% y-o-y growth, and is providing solutions in this space with Perceptive Software. Perceptive Software provides of enterprise content management and business process management software. This involves the capture of data in hard-copies, photographs, physical invoices, faxes, etc., and converting them into digital formats to streamline and automate processes that are currently manual.”

With their future plans and new strategies already lying in the table, Lexmark may exit the inkjet business but is certain to bounce the growth of their laser printer business and printing software. As President Rooke put it, “As we move forward, we remain confident in our strategy, competitiveness and ability to create value for shareholders.”

Sources: Trefis.com/Forbes/Lexmark Newsroom

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