December 10, 2015
Trefis analysed Lexmark’s performance and business changes, highlighting that despite its efforts “to build its end-to-end solutions company”, the “majority of its value” comes from both laser hardware and supplies. With both Lexmark and HP seeing poor sales performance, the analyst notes that “increased channel inventory and intense price competition” from Epson and Canon have affected printer sales.
In turn, “declining revenues across the industry” are said to “suggest it has been in a secular decline”, with the trends set to continue into the next financial year. This is intensified further by pricing competition among OEMs, as Japanese OEMs – “on the back of a weakening yen” – have been able to further reduce prices, pressuring “market share for all participants”.
Epson and Canon’s market share grew by 14.8 percent and 19.5 percent respectively in 2Q2015, and while HP’s grew to 40.8 percent, most growth came from the US and Asia/Pacific (excluding Japan) in inkjet, which itself makes up 58 percent of the total hardware market. Trefis added that despite declines in laser printer MFPs and single-functions, Lexmark “reported strong growth” in monochrome 45 to 69ppm, but revenues are expected to “continue to decrease” over time.
The “shrinking laser business” will mean that average sales prices for hardware will also decline “even as the shipment [figures] remain constant”, with Trefis expecting laser hardware shipments to stabilise at 1.8 million units for Lexmark – 4.5 percent of the market – and Lexmark set to report a falling sales figure.
The influence of remanufacturer and refillers is also having an effect, with Trefis noting that “consumers use these to reduce what they spend on printing”, and with this “commoditisation [set] to dent cartridge and supplies revenue” for all OEMs, including Lexmark. The analyst contends that “supplies revenues for OEMs have been declining for the past few quarters”, and Lexmark’s have “declined over the past few years, accentuated by its exiting the inkjet business”.
Despite Lexmark gaining more MPS business, cartridges sold have declined also thanks to “longer lasting cartridges that print more pages”, with sales falling from 7.2 per printer in 2011 to 5.22 per printer in 2014, and the expectation that this will fall further to 4.82 per printer in 2016.
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