July 30–When Lexington-based Lexmark International announced lower-than-expected earnings last week, the company disclosed that it continued to see weakness in its line of printers built for small workgroups. But executives also said they saw weakness in the large workgroup printers that had previously been growing.
Those categories are part of what Lexmark has dubbed its “core” products, because they are targeted to businesses that print more. By contrast, its “legacy” products include inkjet printers sold to consumers who didn’t print enough to meet the profit expectations of the company.
In the core category, the company said sales of laser printers designed for large workgroups fell 9 percent and unit shipments declined 6 percent. That ends growth in recent quarters.
The company said the large workgroup declines came because the fragile economy is leading businesses to defer purchases. But the overall declines did mask some good news in the category, CEO Paul Rooke told analysts.
Rooke said the company continues to see good performance from the higher-end printers in that large workgroup segment. Those include multi-function laser printers and color laser printers.
The company’s small workgroup category continued to see weakness, though. Sales of printers fell 32 percent and unit shipments declined 53 percent. That comes because the company is ending sales of inkjet printers designed for small offices and home offices through retail partners.
Inkjet is “really the one driving the big declines” as opposed to smaller laser printers, Rooke told the Herald-Leader.
In the future, the company intends to market its small workgroup printers through resellers and other non-retail partners that more directly target businesses.
The declines are “really a story of inkjet,” he said.
Even though the company is pulling its printers from retail stores, Rooke told analysts he expects that the stores will continue to sell the company’s ink cartridges for older printers.
“They’re quite happy moving supplies, even without the hardware being there,” he said. “It’s a profitable business for them, and it brings customers into their store.
“And so that traffic obviously is important to the retailer, so we don’t see a problem there.”
Software business growing
Although most of the attention of last week’s second-quarter earnings was focused on weakness in the company’s printer, ink and toner sales, Lexmark said its burgeoning software business continued to grow strongly.
Sales from the software division grew 88 percent year over year, although that includes revenue from recent acquisitions that was not included in the prior year’s results. Excluding revenue from those acquisitions, sales were up 26 percent year over year.
“All the trends are going well,” Rooke said. “Those are well in excess of any market growth rate.
“We’re quite encouraged by the performance there.”
Anti-counterfeit app launched
Lexmark has launched a new app that allows customers to verify that their inkjet cartridges are not counterfeit.
The app, which is available for Android, Apple and BlackBerry, allows users to scan the barcodes on their Lexmark boxes, bags or cartridges and send the serial number to a database for instant verification, the company said in a statement.
To learn more, go to Lexmark.com/identify.
Scott Sloan: (859) 231-1447. Twitter: @HeraldLeaderBiz.