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Lexmark pins hopes on future upgrades as Q2 numbers dip

Microscope contributor

The hotly tipped upgrade in the enterprise client market next year is unlikely to ignite a corresponding replacement cycle for printers according to Lexmark CEO Paul Curlander.

The Kentucky-based company yesterday filed a 21% drop in revenues for the three months to 30 June as profits tumbled nearly 80% to $17m.Hardware and supplies sales fell 29% and 18% respectively.

Poor demand due to the economy, lower pricing and the negative currency impact were all blamed by Lexmark for the drop in fortunes.The company did however manage to cut op-ex in a year from $316m to $253m,excluding restructuring charges.

There seems to be a consensus among analysts and PC vendors,most notably Dell, that aging clients in large firms are due to be replaced in2010 but Curlander did not believe this signaled a refresh in his market.

“The way we think about it is really over the last five or six year we have become much more uncoupled from PCs. As I look at the distributed printer market, PCs over the last few quarters have done much better,” he said.

This was true of the corporate enterprise where customers wanted “a compelling cost reduction story” before considering “any type of upgrade or change in their distributed environment” and the same could be said about inkjets and SMEs.

For resellers wondering if the market is on the up,Curlander said “I don’t think we have seen anything in the second quarter that would say we are at a cyclical bottom”.

“I do think relative to supplies geographically we did see a little bit of a deceleration internationally, particularly in Europe,in the second quarter.”

The third quarter is unlikely to be a walk in the park and Lexmark is forecasting a sequential decline in supplies revenues. The days when consumables provided the license for printer vendors to print money appear to be over.

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