Statistics, Damned Statistics, and . . .

Lexmark:  their earnings call was no more of a surprise than many others. Given their background and the state of the economy, it hardly comes as a shock (in fact, the  announcement hardly raised an eyebrow) that their Q4 net earnings dropped to zero. While there are certainly variations to be expected, it seems that a lot of companies will follow the same pattern: revenue for the quarter and for the year will be off modestly, Q4 earnings will be abysmal, and full year earnings will be down substantially but still well in positive territory. Which is actually a testimonial to the resiliency of the industry and possibly even a sign of a (relatively) quick recovery.

It was slightly entertaining to hear their spin on cash generation. Lexmark management proudly stated that they generated more than $450M for the seventh year in a row. Well, congratulations and everybody always appreciates positive cash generation, especially in the magnitude of hundreds of millions of dollars. But why such an odd cut point? Well, because it works. You could look at the same figures and state (correctly) that this is the first time since 2001 that they produced less than $500M. So maybe we are actually witnessing a progressive decline that needs to be addressed? 

The logic of reducing focus on consumer/ink jet products was obviously to concentrate on higher value product categories, either business ink jet (contradiction in terms?) or laser products. Ink jet hardware revenue did do the right thing (so to say) by dropping dramatically. Laser hardware did not respond enough to compensate, though, and delivered disappointing negative results. Supplies revenue was certainly bolstered by the shift in product mix (and some channel filling triggered by price increases), but overall the results were down in this category as well. Both of these results were definitely not part of the plan . . .