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Lexmark and Life After Inkjets

From the Printware Blog on Wednesday 29th August 2012 in News

Last month we reported on Lexmark's decision to stop making consumer inkjet printers (Lexmark Pulls Plug on Consumer Inkjet Printers) in a bid to reverse declining sales revenues. By ridding itself of this struggling area of its business, Lexmark hoped to concentrate on the more lucrative software, laser and document management sectors. Following this, Lexmark has now announced that it is to stop producing business inkjet printers too, thereby shutting down its inkjet division entirely. It will, however, continue to provide inks and support for existing inkjet machines.

The decision to close its inkjet division means that Lexmark will be shedding 1,700 jobs, or about 13% of its workforce and will sell about 1,000 inkjet-related patents. Worldwide, the inkjet market declined 13% in the second quarter of this year and Lexmark's legacy inkjet business fell by 66% in the first half of 2012 (Reuters.com). Overall net profit across the company from April to June was down 61% on the same period last year. Closing down its inkjet business is expected to cost Lexmark $160 million as it restructures its remaining divisions but the company is expecting to save $95 million a year once the restructuring is complete.

"Today's announcement represents difficult decisions, which are necessary to drive improved profitability and significant savings," said Paul Rooke, Lexmark's chairman and Chief Executive. (BBC.co.uk)

The restructuring will allow Lexmark to focus on its more profitable solutions, software and imaging divisions, rather than struggling to compete in a shrinking sector that is dominated by HP, Canon and Epson. However, Lexmark is by no means the only printer manufacturer finding it tough in today’s market; Xerox and Canon have cut their profit forecasts for this year, HP’s imaging and printing revenue is down 3% on last year (HP Reports Record Loss) and Kodak’s woes are well documented.

So, why is this happening and what does it mean? There are several factors impacting on the printer market and on the inkjet market in particular. Inkjet printers are targeted largely at home users who want to print photos but it's estimated that 83% of digital images are never printed (PCAdvisor.co.uk). The rise of social media and mobile smart devices makes it easier, quicker and more desirable to share pictures digitally. Inkjet printers also suffer from notoriously high running costs and their biggest selling point, their low purchase price, is being steadily eroded by the falling cost of laser printers. Inkjet manufacturers are hitting back with features like WiFi, AirPrint and Cloud Print in an effort to make their machines easier and more fun to use but it just isn't enough.

The situation in the laser market is not quite as serious, although manufacturers are still feeling the pinch. HP saw a 4% increase in sales and revenue within in its commercial hardware sector and Lexmark has also seen some growth in its business laser division, so there is room for optimism. Indeed, Lexmark's announcement regarding its inkjet operation caused its share price to jump by as much as 20%.

However, the overall picture in the print and imaging industries is one of declining sales and revenues, as businesses look ever more closely at what they are printing. There is increasing pressure to manage costs and reduce carbon emissions, with print volumes dropping as a result. The number of pages printed in Western Europe fell by 1% from 2009 to 2010 (idc.com) and, whilst this may seem modest when considered against the 3.1 trillion pages printed worldwide in 2010, this trend will only continue.

Kodak's failure to adapt to a changing marketplace led to its spectacular fall from grace and, no doubt, the other manufacturers will have taken note. The bottom is not about to fall out of the business laser market just yet but, as HP and Lexmark have found, painful decisions have to be made in order to remain competitive. Much of the focus for these companies, moving forward, will be on areas such as software and document management, which are still healthy and growing.

The consumer market is a different prospect but, despite Lexmark's withdrawal, not entirely a lost cause. The rise of businesses like Instagram and Pinterest, not to mention the continuing success of Polaroid (BBC.co.uk), have shown that creating and sharing images is more popular than ever and has the potential to generate huge profits. People may not be printing their photos any more but there is still a market for consumer imaging, albeit a very different one. Print isn't dead but it is changing and we'll all have to change with it if we want to prosper. 

 

by Anthony Morgan

Posted in News

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