Lexmark International Inc.LXK

Morningstar Rating

Stock Research and Analysis

by Rick Hanna

Lexmark's traditional moat based on recurring high-margin ink sales for its large installed base of printers has eroded, in our opinion. The company is getting squeezed by declining hardware sales, increased competition, and high substitution threats. Read more

Bulls Say

Lexmark's exclusive focus on the print market enables the company to deliver unique solutions to its customers.

The company benefits from the replacement of monochrome laser machines with color, which generates higher revenues from supplies.

Lexmark maintains a solid balance sheet, which we believe will help it withstand the challenging economic climate. Read more

Bears Say

Competitive rivalry is increasing, with new entrant Kodak , the ever-present Hewlett-Packard, and copier-incumbent Xerox.

Lexmark faces long-term competitive challenges as it lacks scale to compete on price and continue to fund aggressive research and development.

Third-party supplies risk undermining the razor-and-blade traditional print model. Read more

Strategy

Lexmark's strategy is to sell its hardware print units to high ink-usage segments to generate increasing and recurring revenue streams of high-margin supplies. The company attempts to differentiate its offerings through leading technology and through its focus on the small- and medium-size business customers. Read more

Management

Paul J. Curlander has been chairman and CEO since April 1999 and was with IBM IBM for 17 years before the computer giant spun off Lexmark in 1991. John Gamble joined the company in 2005 as CFO, coming to the company from semiconductor maker Agere Systems, where he had also been CFO. Read more

Profile

Lexmark is a niche manufacturer of laser and inkjet printers, as well as associated supplies for offices and homes. Two thirds of sales are to business customers with the remainder to consumers. Read more

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