July 22, 2015
Both Reuters and the OEM reported on its 2Q2015 results, which showcase costs “resulting from recent acquisitions as part of efforts to focus on software and services”. Reuters stated that the OEM will cut 500 jobs, or “about four percent” of its workforce, in order to “offset costs” created by acquisitions in the last few months, and Lexmark CEO Paul Rooke told the news outlet that “we are very much not a printer maker anymore. We are very much a solutions company”.
The OEM has acquired around 14 other companies in the last five years, but says it “expects no real M&A activity over the next 18 months”, with the last acquisition that of customer management software developer Kofax in May earlier this year. Reuters pointed out that Lexmark, along with competitors HP and Xerox, are “pushing into high-value software and services business[es] as companies reduce printing to cut costs and consumers shift to mobile devices”.
Lexmark itself reported that revenue was boosted by “strong Enterprise Software performance”, while combined Enterprise Software and MPS units grew by 37 percent, making up 40 percent of total revenue. GAAP (generally-accepted accounting principles) revenue came in at $879 million (€805 million), a fall from $892 million (€817 million) in 2014, while profit margin grew to 41.2 percent from 39.4 percent, and the fall in revenue was blamed on the company’s 2015 “restructuring”.
In non-GAAP segment revenue, the Imaging Solutions and Services (ISS) unit saw revenue fall by 11 percent, while MPS revenue grew four percent. Non-MPS revenue fell by 12 percent, while inkjet exit revenue from the OEM’s decision to leave the market fell by 48 percent. Enterprise Software revenue reached $139 million (€127 million), a growth of 136 percent thanks to the Kofax acquisition, and the OEM also announced its plans for restructuring to generate savings of $65 million (€59 million).
These plans include the job cuts, which will take place over the next 18 months and affect workers worldwide in administration, marketing and development roles within the ISS unit, with around a third of positions “being shifted to low-cost countries”. The OEM’s forecast for the next quarter was also revealed, and said to be “well below expectations” according to Reuters, with revenue expected to rise in 3Q2015 and in the whole year by between “-1 to +1 percent”, though Cross Research Analyst Shannon Cross stated that the restructuring “was expected … It sounds like they are trying to position 2016 as a recovery year”.
Rooke added: “Lexmark delivered strong growth in Higher Value Solutions revenue, which is comprised of Enterprise Software and Managed Print Services. Despite the ongoing headwinds from the strong US dollar and near-term laser supplies channel optimisation particularly in EMEA, overall Lexmark delivered a good quarter.”
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