Lexington, KY—Lexmark will stop making inkjet printers to focus on its more profitable imaging and software businesses, reported Reuters, with the announcement sending its shares up 20%. The company said it was quitting the inkjet business because of aggressive market pricing and the investment required to maintain a sustainable acceptable return.
The company plans to continue to sell laser printers and augment its print services business, for which it has made several acquisitions in the last couple of years. According to Reuters, Lexmark announced it would sell about 1,000 inkjet-related patents and cut 1,700 jobs, or 13% percent of its workforce.
“Lexmark’s ‘rip the Band-Aid off’ approach, while creating greater near-term revenue headwinds than a more gradual wind down, should result in a cleaner slate sooner from which to grow,” Wells Fargo analyst Maynard Um told Reuters.
Lexmark expects revenue from inkjet hardware and supplies, which accounted for 21% percent of 2011 revenue, to drop to 10% next year as it continues to supply ink and support existing printers. Revenue from its legacy inkjet hardware business declined 66% in the first half of 2012.
“We plan to continue using part of the free cash flow to accelerate growth in the software business through acquisitions,” CEO Paul Rooke said on a conference call.
Lexmark bought Perceptive Software in 2010, which provides software and services used to manage imaging, documents and other content. It bought Brainware, Inc., ISYS Search Software and Nolij Corp. in 2012 and added them to the Perceptive unit. The software business accounted for nearly 5% of Lexmark’s 2Q revenue, up from about 2% a year earlier, reported Reuters. lexmark.com
