Lexmark downgrade - are we/they to be concerned?

From Marketwatch:  Standard & Poor's said late Wednesday it downgraded the corporate credit and senior unsecured debt ratings on Lexmark International Inc. to BBB- from BBB. The outlook is stable. "The downgrade reflects our belief that total revenue and profitability will remain pressured as Lexmark works through a strategic business mix shift toward higher usage and more profitable product sales in its consumer segment," said Philip Schrank, an S&P credit analyst, in a statement.

Let's just look at the elements of this short statement:

• Total revenue and profitability will remain pressured - that pressure will definitely remain, as the trend towards broader offerings leads to more exposure for those companies who focus on specific segments. If you are a pure-play company like Lexmark, you have to be ideally positioned to leverage your products and be investing to expand and reposition your technology base. The fulfillment of these prerequisites is questionable at best in this case.
  
• Strategic business mix shift - it is fair to say that some shift has taken place, but only within the long-suffering inkjet business area, which has not changed the overall outcome significantly. A shift of more consequence would involve a seismic innovation effort to develop significant new products or a serious reconsideration of the long-term purpose and viability of the inkjet business area.
  
• Higher usage and more profitable product sales in its consumer segment - this target, at least at the level of achieving acceptable unit placements, is practically a contradiction in terms. Kodak is attacking the same "high-volume consumer" space, promising 5-6 million placements annually within two years, others (most notably HP and Epson) are waiting with "shovel-ready" products and pricing models that can exploit the same space, and there is still the possibility that Memjet partners will be entering the market within a year. So that space, while never all that big, is going to be more crowded than ever.
  

Lexmark has a great technology base and product line-up, but the biggest questions remain: how to expand the overall product portfolio, and what to do ultimately with the ink jet business. Until those issues are resolved, their financial outlook will remain questionable.