Monday, March 30, 2009

Invitation to Say . . . What?

Lexmark held an investor / analyst day at the New York Stock Exchange recently and took the opportunity to say . . . nothing special. Considering the cost and effort of bringing this key audience together, and considering the exceptional circumstances in the economy and in the imaging industry, it was nearly breathtaking how little substantial or new was shared.

Any outlook for future revenue or earnings was studiously avoided, maybe for good reason. Xerox recently revised their Q1 outlook downward and was immediately rewarded with a stern round of agency downgrades and a thrashing in the stock market (although the stock price has since recovered). Such a severe reaction may not have expected , and Lexmark management, who previously may or may not have been prepared to make a similar statement, refused to be drawn on the topic. 

Other statements? More cost cutting and restructuring, but that announcement is not necessarily newsworthy these days. The amount ($75M) is substantial, but one pointed question about how much of that actually benefits the bottom line remained unanswered. 

Some statements were vague or even contradictory: core investments will include R&D, but no focus was provided for which product or business area will benefit, and overall R&D spending will be reduced. Even portfolio-challenged Kodak provided more guidance on where their core investments will be targeted, but they also ignited a discussion by revealing their direction. So maybe again Lexmark thought better of providing too much (any?) detail.

Other topics highlighted:
  • The divisions have been renamed - old news, confusing terminology.
  • Pullback from unprofitable product lines and regions - old news.
  • New products - always welcome, but these are all improvements in the current space.
  • Reliance on internally developed technology - commendable but severely limiting.
  • "Print less, save more" - a remarkable statement for a printing company.
One statement that did stand out was the clear demarcation to the world of copiers/MFPs, with the newest model positioned as the "copier killer." The presentation included tape on the floor depicting the size and service access areas of the competing products, obviously stressing how monstrous the competing products are. So while other companies are expanding their approaches and product portfolios to embrace all corners of the customer organizations, Lexmark has clearly stated that this is not an area of interest for them. Especially with a renewed focus on managed print services and a declared focus on high-volume and high-value installations, it is notable that an entire category of relevant products will not be pursued.

Several pointed questions surrounding the future of the inkjet business were also artfully dodged, leaving the audience with no clear outlook. Margins are at an unacceptable level but will improve, installations are dropping but will stabilize, higher volumes will improve results but no expected usage patterns were provided. And (again) the statement that inkjet will now successfully enter the business market. But the questions of how, why and why now were also left open.

So maybe the event and accompanying statements made sense for the hosts. But many of the guests were left wondering what the real message was.

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